The strategy of investing in companies with low price-to-book ratios continues to be successful in the long term. Historical evidence on reversion to the mean justifies the strategy, but it is seldom consistently pursued because environmental pressures on investment analysts make the strategy almost unbearable to maintain. To counteract the pressures and focus analysts on the low-P/B strategy, investment firms need to focus on analyzing the long-term expectations for companies, not short-term stock price forecasts, and avoid intuitive, emotional investment decisions.
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