Paragraphs of wisdom

The second and more important development relates to the shift of investment emphasis from values established by the past record to values to be achieved solely by future growth. This would be an entirely logical proceeding if security analysts and investors could be sure that their predictions of future earnings changes are reasonably reliable. An accurate forecast of the long-term future is infinitely more valuable than the most elaborate dissection of the past. But we are skeptical of the ability of all but the most gifted analysts to chart with precision the growth rate of a given company for many years ahead. A large part of the market's valuation of our most popular common stocks is closely tied in with prophecies as to their future rate of growth; were the earnings actually to increase much more slowly than anticipated or not at all, the value justified by the past rate of earnings alone would be only a minor fraction of the price the "investor" pays.


- Benjamin Graham, Security Analysis