There’s a funny thing about stock markets where profitable companies have higher returns, on average. A passing knowledge of the efficient markets hypothesis would say this shouldn’t be the case. The efficient market hypothesis says markets suck in information and price securities accurately. We know this is approximately true because 99.9 per cent of investors can’t beat the market consistently. You’d think the very first piece of information markets should be incorporating into a stock price is the company’s profitability. But yet it doesn’t happen, at least not straightforwardly. Investors can systematically make money by buying profitable companies and selling…

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