Key insights
- The post emphasizes the primacy of earnings growth in driving stock prices, arguing that companies with strong earnings will outperform, regardless of valuation concerns or cyclicality. It suggests realistic expectations are crucial, cautioning against expecting rapid gains from beaten-down stocks without sustained earnings improvement. The author implies a bullish stance on growth stocks with solid earnings and a cautious view on value traps.
If a company is growing, it will outperform whatever beaten down stock you’re holding. That’s reality. You can’t expect PayPal to go up 50 percent in a month, you’re going to be looking at like 55 or 60 share price in a year at best. Now you could look at something like mu and say “that’s cyclical! It’s gambling!” It doesn’t matter what you think or what you want. If earnings are there a stock will go up, period. If they are overvalued but actually growing at 30 percent a year the stock will go up whether you think that’s fair or how it should be. And beaten down stocks can go down for a while - people need long term proof they won’t get rugpulled by bad earnings. EARNINGS MATTER, period. That’s all that matters.