A common fallacy in stock market investing is assuming that a good company makes a good investment. Suppose we define a good company as one that has experienced rapid growth in the recent past. Explain the reasons why shares of good companies may or may not turn out to be good investments.
When a company has experienced rapid growth, their growth is usually incorporated, at least in part, in their current stock price, which allows the stock to be traded at a higher price, because rapid growth has been experienced in the recent past. This keeps the stock price higher ...
The solution provides a detailed discussion determining why shares of good companies may or may not turn out to be good investments.