“People are always asking me where the outlook is good, but that’s the wrong question. The right question is: Where is the outlook most miserable?”
JOHN TEMPLETON (TEMPLETON, 2008)
FROM CHAPTER A we know that fundamentals-based investors want to buy stocks that trade at a significant discount to their intrinsic value (i.e., bargains). Given the efficiency of the stock market, it would be a formidable and extremely time-consuming task to look for undervalued stocks if one lacks a compass that points to potential bargains.
Top investors know that mispricing is more common in some pockets of the market than in other. To avoid wasting their time on stocks that are most probably not worth further scrutiny, they often look ...