Corporate earnings are the primary driver of stock prices over time
– however, expectations of future earnings also affect stock prices
Fundamentally strong companies are more likely
– to generate superior earnings growth on a sustained basis; and
– to experience positive earnings revisions
Good companies are not always good investments
– relative valuation, macroeconomic and technical factors also affect stock prices
Experience has taught us
Attractive returns are attainable by investing in companies that deliver superior earnings growth
– favorable conditions for alpha exist when the market inefficiently discounts future earnings
– opportunistic, conviction-based portfolio construction and informed risk management increase the potential for alpha
