recent investor note on strong corporate results and extrapolate these many years in the future. These projections then justify high stock prices relative to current earnings, cash flows and book values. Unfortunately, superior results are achieved only over a few quarters. The competition often brings up quickly, so the flyer soon to include yesterday's underperformers regarding stock price.
For example
Peters and Waterman published in the 80 " In Search of Excellence: Lessons from Americas Best Run Companies . In this book, the authors filtered the market after successful companies and those companies then examined to common "success factors". Unfortunately, could the above-average Results will not last long, and the non-excellent companies joined as graph below shows (Haugen, The New Finance, p. 46):
The book may be interesting insights allow in business contexts, but it is good enough for any investment decisions.
Insufficient reüssierende company will restructure (strategy and management changes); or. The probability is high that recover profits and share prices of the laggards in one or two years.
How quickly losing and recovering above-average performance is CARRIED illustrated chart below (Haugen, The New Finance, p. 43) : 
Companies with the lowest PE (P / E) are stated next year compared with the average loss of profit, but are They recover quickly, contrary to the expectations of the market. Companies with the highest PE down next year compared with the average but of gain, but does this increase in profits in the years to decrease rapidly, so disappointed the high expectations are likely.
simple human behavior prevents this: Undervalued stocks have lately after a negative price performance, poor results and a press, miserable. In short, it shares that look bad in the depot, shares you sold prefer to not have to present to the client or the boss. Overvalued stocks seen, however great, they are the current stars, so they are often purchased to present it. Because the customer wants and keep the place is something one is even a movement by the Fund Manager to Chief Investment Officer sought boss. Funds would also like any manager, that deviate significantly from the benchmark, as the disadvantage of underperformance outweighs the benefit of outperformance. Funds are therefore generally a slightly underperformed against their benchmark, which is caused by the charges.
far is the theory. If this theory but also confirmed empirically, or heard it in the drawer of the nice explanations with little practical significance. like you can
The interested reader: There 
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