Some stocks that were popular in 1972 flourished—McDonald’s, Johnson & Johnson, and Merck, to name a few. But even growth stocks with the best fundamentals were overpriced in 1972. McDonald’s, for example, was a solid company: its earnings would grow 253 percent over the next five years. But despite the earnings growth, over the same span, its share price fell by 19 percent—only then did the market find the stock fairly priced.
