There is a strong tendency in many areas of the financial market, due to the action of economic forces, for results to revert to their long-term mean.

If a certain company, or industry, earns large profits for a period of time, then more companies, or capital, will enter and the increased competition will likely drive the exceptional profits down to a lower level. If a certain commodity goes up in price, producers will be encouraged to produce, or find, more and the extra supply will drive the price down.

The Dow's historical return on equity has been around...

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This reversion-to-mean explanation is given in ‘Value Investing’ by Bruce Greenwald.

In the entire world there are few brand names as widely recognized as Mercedes-Benz. It is universally associated with a superior product that is high in quality and prestige.

By all rules of product differentiation, Mercedes-Benz ought to enjoy a strongly protected market position...


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