Theoretically, all future growth should be reflected in the current price.

In theory, a stock’s price is the present value of all of its future dividend payments (whatever they may be). Of course, the further out in the future you get, the more “discounted” the estimated dividend payments become, and the less they affect the current price of the stock.

I think something worth expanding on is the idea that “future” growth can be reflected in a current stock price. Every investor has a different time line, right? So the “future” for those companies mean different things to different people. To some, the future may be 6 months and they are out. Others might see it as 2 years. Others 20. I don’t see how a 20, or even a 2 year growth expectation can be reflected in price.

What’s the consensus on how much growth is reflected in price?

wrt your post and the 3 stocks, i realize Mark was referring to this “economy”, which I think we’re all assuming means 6 to 12 months. thus, your analysis of growth/price reflection holds up.

A scarier possibility:

Without knowing the future neither you nor the market can calculate the fair price for the stock so you both just make your best guess.

PS I loved your three “stock” picks.

@Susan: If you’re buying for reason #3, you’re not investing. If it’s a pure bet, it’s gambling. Too many people confuse the two and think they’re investing in a company when they’re just emotionally committed to the stock because they’ve put so much time into it.

1. You know something the market doesn’t know, or
2. The market knows something you don’t know.

but I would add a third possibility:

3. You and the market both have no real clue about the future growth based on analysis, but you like the company, have confidence in its management and you want to bet on the stock’s future growth not being reflected in the current price.

I think buying for reason #3 is ok as long as you understand it’s a pure bet not based on analysis.

Actually, I think it is: “I’ve done enough research that I’m confident I know every single material fact about the company, and I’m confident that I am able to come to superior conclusions based on these facts, than the rest of the market. I am also confident that I am able to tell the difference between luck and superior skill.”