Part 9/13:
This differentiation allows investors to capitalize on mispricing—buying undervalued stocks with high predicted upside, and avoiding overvalued ones. Over time, if predictions are correct, the market will eventually recognize the true value, and the stock price will converge with the modeled intrinsic value.
Why Most Financial Techniques Fail and the Importance of Macro Awareness
The speaker criticizes traditional valuation metrics like P/E ratios and underscores that accurate valuation depends on understanding macro trends, technological progress, competitive landscape, and geopolitical factors.