It is important to understand within the world of finance that “good companies” may not be “good investments.” What we mean by this is you could have a company that provides an excellent product or service, but might not be a good investment into the mid-to-long term. You may also have a company that doesn’t really provide a high quality product or service in your opinion, but in fact is (or has been) a great investment. As we look at the market and try to better understand stock valuation, try to think about an individual company that falls into one of these buckets. If you are having trouble with this, think about some of the companies you use the most in terms of products or services, and think about their annual returns. Another way you could look at this is to do a search for the highest dividend paying companies, or the companies with the highest annual returns, and see if you recognize any company on the list as having a “less than excellent” product or service. Be sure to post any data you found as your supporting evidence so your peers can also see what you are seeing. Be sure to summarize / comment on what the company’s returns are and then discuss your thoughts on how high quality their product/service is. Finally, compare the two and discuss whether you think this makes sense or not.
