Author: Raoji

Source: Motley Fool

I think too often, young analysts believe that the goal of an analyst is to demonstrate how much they know about a company and build a perfect earnings model. I don’t think I’ve ever seen an analyst model their way to a great stock idea!

I view the goal of the analyst as developing conviction that the consensus is wrong about something important. Then their job is to communicate why they believe they are correct and the consensus is wrong and to compute the valuation impact. Once we own a stock, their job is to actively monitor new information to assess if their view or the consensus view is coming to fruition.

There are a lot of important areas the consensus can be wrong: management quality, business quality, long-term potential differing from current results, valuable non-earning assets, and so on. To make excess profits, you need to hold a nonconsensus view and be right.

-Bill Nygren, Oakmark Funds