the christmas turkey

It was New Year's Eve and a nice country family adopted a young turkey. They placed him in a clean aviary protected from bad weather and possible predators. The turkey felt that he was a lucky bird: his owner fed him every day. With a smile he always said “eat a lot to get really chubby!”. It was like this for months and months, then the turkey felt more and more secure and peaceful. Until the 24th of December arrived… Now you will never forget what the rearview bias is. It is the tendency to believe that the future will be a continuation of what has been happening so far. Dealing with this in investment analysis is delicate, as the future of a company, in most cases, actually reveals itself as an extrapolation of its past. This is to be expected, as large companies do not undergo sudden changes all the time, but when a major change happens, it can bring extraordinary returns or catastrophic losses. The important thing is not to lose sight of the fact that this bias exists and to redouble caution when projecting results, checking whether there are signs on the horizon that the analyzed company may undergo significant changes. It is also recommended to assess how susceptible each company is to major changes. Some businesses are much sturdier than average and therefore safer investments. Just like different animals face different risks. The turkey is gone, but the family dog is doing well and will see many Christmas parties yet.