Aug 2019
When more and more investors (and their money managers) concentrate their purchases on the most popular companies…— as is the case nowadays—their transactions are commonly referred to as “crowded trades.” With many investors crowded into a relatively few stocks, the result is typically very high stock prices relative to earnings or some other relevant metric. However, while currently high stock prices often reflect good stock performance in the past, they suggest not-so good performance in the future. Conversely, low prices today are frequently associated with above-average returns in the future.