If I could ask only one question regarding each investment I had under consideration, it would be simple: How much optimism is factored into the price? A high level of optimism is likely to mean the favorable possible developments have been priced in; the price is high relative to intrinsic value; and there’s little margin for error in case of disappointment. But if optimism is low or absent, it’s likely that the price is low; expectations are modest; negative surprises are unlikely; and the slightest turn for the better would result in appreciation.
