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What isn't priced into a stock?

Personal Finance & Money Asked on July 29, 2021

Are there any attributes of a company that doesn’t get priced into the stock? For example if I notice that company A tends to innovate and come up with new products or services more often than company B, is this rate of innovation priced into company A? Also what about other qualities, like how smart the company CEO is, the company work culture, or intangible assets like how much data the company collects, and so forth? If this information isn’t priced in or is less accurately priced in, what do you think is the most important non-priced in attribute of a company that one should pay attention to?

2 Answers

"Material nonpublic information" and "unexpected news" have not been priced into the stock. As simple as that.

You can make thousands of examples in your question, but as long as it is non-material or is public, it is priced in.

Answered by base64 on July 29, 2021

Also what about other qualities, like how smart the company CEO is, the company work culture, or intangible assets like how much data the company collects, and so forth?

If these qualities are truly significant, won't these qualities be reflected in the bottom line too? If a smart CEO is truly more effective, if the work culture is truly superior, and if the intangible assets are truly valuable, they would have an effect on the bottom line in the form of higher profits.

Beware of counting intangibles twice. Some people will produce a valuation of a company based on the profits that the intangibles created, and then add a premium for the intangibles on top of the valuation produced from the profits. This probably produces an inflated valuation because the intangibles are double-counted.

If a superior management produces superior profits, there is no need to double-count the effect of superior management by adding a "superior management premium" to your valuation that was derived from superior profits.

Answered by Flux on July 29, 2021

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