Enthusiasm can sometimes get the better of all of us. Investors always find ways to justify prices for companies at any stage in the cycle, writes William Heathcoat-Amory, partner at Kepler Trust Intelligence.
To contrarians, the fact that the price of something has gone up tenfold does not necessarily make it more attractive. However, momentum (as it is now called) is popularly touted as a sustainable investment strategy for the long term. Within the world of investment trusts, 'excessive optimism' is more easily measured in terms of premiums to net asset value (NAV). In our view, premiums are very rarely sustainable over the long term, and tend to evaporate at inflection points, exacerbating a poor period of performance from a manager in absolute or relative terms. What will be the bi...
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