[1] What Is The Purpose Of Better Bets?
The purpose is to identify, with more conviction, that some stocks may be better investments compared to others because of the disconnect between their market valuation and financial performance. Exciting investment opportunities sometimes lie in plain sight across industries and sectors. Such comparisons offer a systematic way of unearthing these opportunities by identifying pricing discontinuities.
[2] Why Are MU, QRVO Better Bets Than Skyworks Solutions
These stocks have higher revenue and operating profit growth compared to Skyworks Solutions in the last 3 yearsDespite this, they have lower multiple suggesting that the market may not yet be recognizing their financial performance fullyIf you were to bet on these stocks, the probability of multiple expansion, relative to that of Skyworks Solutions, exists if their growth continues to stay aheadThis could mean better returns vs. Skyworks Solutions
[3] Why Are You Using P/EBIT Multiple And Not Any Other Multiple?
P/EBIT or Price to Operating Income Ratio is a better reflection of how the market is pricing each dollar of profit compared to P/S or P/E multiple. While P/S multiple ignores differences in profit margins of companies being compared, P/E is more prone to fluctuations and distortion due to one-time benefits and charges that do not necessarily reflect core operations
[3] Why Have You Not Considered Last 12 Month Growth In Choosing Better Bets
We have not considered growth over the last 12 months because of the distortion in growth rates induced by supply and demand disruption resulting from the Covid-19 pandemic.
[4] If I Were To Decide Based On Better Bets, Will I Make The Right Pick?
Better Bets work in a probabilistic manner. Picking a stock with a lower market valuation but better financial performance increases the odds of realizing better market returns but does not guarantee it. For the realization of better returns, it is imperative that the stock's growth and margin performance continues to exceed that of the other so that the market gets enough time to recognize this consistent outperformance.
[5] Where Can I See Other Better Bets?
You can look at our Investment Ideas page and simply search by keywords such as 'better bet', 'better buy', and 'promising bet'
[6] I Don't Want To Go Through Multiple Better Bets, Can You Simplify Investment Decision For Me?
Consider looking at our High-Quality Portfolio which has outperformed S&P 500 and is periodically rebalanced based on our quality filters that go beyond the criteria we use for finding 'better bets'. We do not currently offer our high-quality portfolio as a mutual fund or an ETF. However, we do expect to make opportunities available to invest in the portfolio in the near future.
