The best long-term strat­egy for mak­ing money in the stock mar­ket is: “Buy low expec­ta­tions and sell high expectations.”

Sounds easy…but it is not easy…or every­one would do it, right?

There are two key chal­lenges to exe­cut­ing this strategy:

1. Mea­sure the true prof­itabil­ity of the busi­ness, which requires trans­lat­ing account­ing data into eco­nomic earn­ings, to under­stand its his­tor­i­cal cash flows.

2. Mea­sure the future cash flow expec­ta­tions embed­ded in the stock price.

Under­stand­ing the expec­ta­tions for future cash flows embed­ded in stock prices is not pos­si­ble with account­ing data or any ratios (e.g. P/E, EBITDA, etc) based on account­ing data. You need a dynamic dis­counted cash flow model to mea­sure the expec­ta­tions embed­ded in stock prices.

Lever­ag­ing our patented research plat­form, we build and update thou­sands of eco­nomic earn­ings and dis­counted cash flow mod­els daily, which is why we have con­fi­dence in our stock picks.

For more details on how we find stocks with “low expec­ta­tions” as well as super-high expec­ta­tions, see Invest­ment Strat­egy 101.