A Great Company Can Be a Great Investment

Posted: 8 Aug 2006

See all articles by Jeff Anderson

Jeff Anderson

affiliation not provided to SSRN

Gary N. Smith

Claremont Colleges - Pomona College

Abstract

A classic investment mistake is to confuse a great company with a great investment. It is a mistake because a company's well-known virtues are presumably already factored into the price of the company's stock. This study tested this mistake by looking at the stock performance of the companies identified each year by Fortune magazine as the most admired companies in the United States for 1983 through 2004. Surprisingly, a portfolio of these stocks outperformed the market by a substantial and statistically significant margin, which contradicts the efficient market hypothesis.

Keywords: Equity Investments, Fundamental Analysis and Valuation Models, Portfolio Management, Equity Strategies, Investment Theory, Portfolio Theory

Suggested Citation

Anderson, Jeff and Smith, Gary N., A Great Company Can Be a Great Investment. Financial Analysts Journal, Vol. 62, No. 4, pp. 86-93, July/August 2006. Available at SSRN: https://ssrn.com/abstract=922308

Jeff Anderson

affiliation not provided to SSRN

No Address Available

Gary N. Smith (Contact Author)

Claremont Colleges - Pomona College ( email )

Claremont, CA 91711
United States

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