Can high net income growth guarantee higher stock prices in the future?
I recently conducted an intriguing experiment using NexusTrade's AI assistant Aurora to challenge the common assumption that companies with higher net income growth or larger market caps consistently outperform the broader market. The results were eye-opening!
Here's what I discovered:
✅ Simply selecting stocks based on net income growth or market cap doesn't guarantee superior returns
✅ In one experiment, a portfolio of high-growth companies significantly underperformed the S&P 500
✅ A second experiment with larger cap companies outperformed, but with higher volatility and drawdowns
✅ Investing in an index fund (SPY) yielded better risk-adjusted returns in both cases
Key takeaways:
1️⃣ Financial performance is just one piece of the puzzle in stock selection
2️⃣ Successful investing requires a nuanced approach considering multiple factors
3️⃣ Tools like NexusTrade can be invaluable for rapidly testing and refining investment strategies
This experiment highlights the complexity of the stock market and the importance of continually challenging our assumptions. While individual stock picking isn't futile, it requires a comprehensive strategy and adaptability based on empirical evidence.
Want to dive deeper into my findings and explore how AI can revolutionize your trading strategies? Check out the full article here: https://medium.com/p/0c966867f0c6
Like this experiment? ♻️ Share this article with a friend and help them make better investing decisions.