Episode summary
Weird Ways to Predict Stock Returns | Barron's Streetwise
Barron's Streetwise
· · 32 min · Guests: Alex Edmans
Summary
The episode explores how markets misprice both obvious and quirky signals. Alex Edmans argues that investors systematically overreact to labels and cosmetic changes, underreact to material information like employee satisfaction, and often miss subtle cues from CEOs. He cites research showing that companies on “best places to work” lists beat the market, while national stocks can fall after a World Cup loss because of investor sentiment. He also points to absurd but profitable signals such as name changes, remote AGM locations, corporate jets, and oversized CEO signatures.
Edmans’s broader point is that many “crazy” market moves have a grain of sense behind them: investors want to act fast, but that impulse can create mispricing. He also says individual investors tend to lose because of overconfidence and limited information, with men and especially single men showing the worst trading behavior in one large brokerage study.
The second half shifts to Andrew Lapping of Randore Fund Management, who says he is finding value outside U.S. tech mania, especially in China, Hong Kong, Philippine banks, and out-of-favor consumer names. He favors cash-generative businesses with aligned founders, net cash, and low valuations, while warning that China still carries governance, structure, and geopolitical risk.
Key takeaways
- Alex Edmans says the market overreacts to cosmetic labels, with examples like AI-themed rebrands and ESG name changes creating big short-term mispricings.
- Edmans says companies on the “hundred best companies to work for in America” list outperformed by 2.3% to 3.8% per year over 28 years.
- Edmans cites research that remote AGM locations can signal a worried CEO and precede 7 to 12 percentage points of underperformance over the next half year.
- Edmans says individual investors lose because overconfidence makes them think they have an edge when professionals have the full picture.
- Andrew Lapping says he is finding value in China, Hong Kong, Philippine banks, and branded consumer businesses trading on much lower valuations than U.S. market favorites.
Notable quotes
“Behind any crazy decision or nonsensical decision, there is a grain of sensibility behind it”
“You could buy companies on this list and they would outperform by 2.3 to 3.8% per year”
“The stock price went up by 582% in a single day”
“the stock then underperforms by 7 to 12 percentage points over the next half year”
“We go where the value is”
How the episode opens
Behind any crazy decision or nonsensical decision, there is a grain of sensibility behind it, which is why these decisions keep getting made and why smart people force them. And the grain of sensibility is the idea that well, if you snooze, you lose. Hello and welcome to the Baron Streetwise podcast.
I'm Jack How and the voice you just heard is Alex Edmunds. He's a professor of finance at London Business School and he has a new book out on one of my favorite topics, people getting weird with money. It describes a lot of the things I write about.
I'm something of a financial weirdologist. And Alex's research is a great source if you're into that sort of thing. And also, we're here in this episode from Andrew Lapping.
He's chief investment officer at Randore Fund Management. Andrew will give us a temperature check on the stock market and AI mania and I'll talk about some less watched stocks around the world that he's been buying. Let's get into it.
Listening in is our audio producer Emily Sland. Hi Emily.
Hi Jack. — Emily I have no spiel. Usually I do a spiel here. I I say a few things about a few things but I don't I don't have a monologue. I don't have a rigomear roll. Before we get to Alex, let's get weird with you. Tell me about something that you spent money on that you regret that you shouldn't have done. Something What's the What's the weirdest or worst thing you've ever spent money on?
I'm going to say charcoal toothpaste. It was all the rage. So, I bought some. Putting black on your teeth and with the theory that they will be whiter and the only thing that happened is my my sink got black permanently.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- stock return prediction
- market efficiency
- value investing
- investment research
- behavioral finance
Watch the episode
Watch “Weird Ways to Predict Stock Returns | Barron's Streetwise” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Barron's Streetwise
-
America’s Debt Reckoning: 5 Paths Forward | Barron's Streetwise -
AI’s Big Payoff? Apollo’s Top Economist Doesn’t See It Yet. -
Does Show Business Still Work? | Barron's Streetwise -
The Disruption Scorecard | Barron's Streetwise -
Spooky Agents, Cable’s Second Death, and Stock Picks | Barron's Streetwise -
No Robots Allowed | Barron's Streetwise
Barron's Streetwise, this episode and its artwork belong to Barron's. Octagon is not affiliated with the show; this page is an independent summary.
