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Chapter 15. Ten Lessons for Investors > Lesson 6: Everything has a price

Lesson 6: Everything has a price

Investors are constantly on the lookout for characteristics that they believe make the companies they invest in special—superior management, brand name, high earnings growth and a great product all come to mind. Without contesting that these are good characteristics for a firm to possess, you have to still recognize that markets generally do a good job of pricing-in these advantages. Companies with powerful brand names trade at high multiples of earnings, as do companies with higher expected growth. Thus, the question that you have to answer as an investor is not whether having a strong brand name makes a company more valuable, but whether the price attached to the brand name by the market is too high or too low.

Proposition 6: Good companies may not be good investments.


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