Why earnings matter

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Reaffirming the philosophy that underpins our investment process

Rosenberg Equities’ core investment belief is that earnings matter. Why? Because we believe that future earnings and fundamentals ultimately drive share prices. We seek to capitalise on this by building what we define as an ‘earnings advantage’ into every portfolio. This earnings advantage should be a combination of better quality earnings, better growth in earnings and better capture of undervalued earnings (higher earnings yield).

It is important for us to periodically validate these ideas to ensure that our investment premise remains sound. We recently re-validated our assumption that stocks with superior earnings yield, on average, have higher stock returns. In other words, that there is a strong positive relationship between earnings delivered and stock performance.