Non-Consensus Investing by Rupal J. Bhansali
Author:Rupal J. Bhansali
Language: eng
Format: epub
Tags: BUS036070, Business & Economics/Investments & Securities/Analysis & Trading Strategies, BUS036090, Business & Economics/Investments & Securities/Portfolio Management
Publisher: Columbia University Press
Published: 2019-08-16T16:00:00+00:00
“When failure is priced in but success is not, the risk-reward balance becomes extremely attractive.”
The market anchored on the unsuccessful launch of Windows 8 phones and tablets as evidence of permanent failure. I was less concerned because I knew from long experience that Microsoft has a history of initially waning but eventually winning. For instance, the company had missed launching a browser in a timely fashion, giving Netscape an early lead. But they made a strong comeback with Internet Explorer. In the early days, Xbox was viewed as the poor cousin of the more popular PlayStation 2, but over time, it narrowed the gap.2
The consensus view was that Microsoft would stagnate or decline, whereas my research showed many opportunities for profitable and lasting growth. When failure is priced in but success is not, the risk/reward balance becomes quite attractive. As the company’s strategy played out, earnings growth far exceeded initial consensus expectations, which forced the street to alter its negative view to a more positive one. Unsurprisingly, the stock has almost quadrupled from its 2012 lows of $28.50 to more than $110 in 2018, as what was once priced for failure and disappointing growth is now getting priced for success and steady growth.
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