Drivers of asset selection
Asset selection consists of identifying markets, market sectors and individual assets that will do better or worse than the rest, and over- and underweighting them in portfolios. The higher an asset’s price is relative to its intrinsic value, the less well it should be expected to do (all other things being equal), and vice versa. The key prerequisite for superior performance in this regard is above-average insight into the asset’s intrinsic value, the likely future changes in that value, and the relationship between its intrinsic value and its current market price.
Mastering the Market Cycle by Howard Marks