The mistake we often make when valuing a stock is overestimating the business growth potential, how much free cash flow it can generate, and so on. We extrapolate a spurt of excellent performance caused by temporary changes such as a brief supply and demand tailwind into the distant future. Or sometimes, we just fail to anticipate the actions of other competitors, new entrants, and changes in the industry.

Imagine you’re about to make a bet on a soccer game. What do you do? You either pick your favourite team, or pick the one you’re familiar with if you don’t have…

J. Yeo

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