“If 99% of people who buy corporations for a living can't beat a monkey throwing darts over time...why do we believe people who run corporations for a living are any smarter?“
Because the 1st requires predicting what other investors think about a company or the economy (after all, the stock price doesn’t move in align with its profits/revenues). Not whether a company will be successful.
The 2nd simply requires knowing what consumers want, whether they be individuals or businesses. You just need to solve their problems in a better way than competitors. So understanding the fundamentals of a market is enough.
What you're describing is the "Greater Fool Theory" of asset pricing...where the emotional temperature of other investors sets the price for an asset. This is true only for assets that don't produce cash flows and thus can't be valued using traditional valuation models (ie. like gold, crypto, etc).
Businesses on the other hand are properly valued for their profit/revenue potential given the available information at the time. This has been proven over and over again. The data is clear on this; the high level of market efficiency is why the stock market is so hard to beat.
Successful investing (not trading) absolutely does require predicting whether a company will be successful. Both investors and employees of a company need to be correct about the thesis for why the company solves a consumer need. Otherwise both parties will lose.
IIRC, this is one of Warren Buffets main strategies and why he beats the market. He mainly invests in companies that are undervalued and with good cash flows. He doesn't have to risk the market coming to their senses like with shorting because even if the stock price goes down, he just holds onto it and rakes in those cash flows.
Point taken. I was talking more about trading, not investing long-term. If we're talking about long-term investing, most funds have strict limitations, and can't be too focused on any one single stock/sector too much.
Because the 1st requires predicting what other investors think about a company or the economy (after all, the stock price doesn’t move in align with its profits/revenues). Not whether a company will be successful.
The 2nd simply requires knowing what consumers want, whether they be individuals or businesses. You just need to solve their problems in a better way than competitors. So understanding the fundamentals of a market is enough.