In other words, “outperformance” is just another word for one thing appreciating relative to another. And, clearly, that can’t go on forever. Regardless of how great its merits may be, “a” is unlikely to be infinitely more valuable than “b.” That means if “a” keeps appreciating relative to “b,” there has to be a point at which it will become overvalued relative to “b.” And just when the last person gives up on “b” because it’s been performing so poorly and jumps to “a,” it will be time for “b” (now compellingly cheap relative to “a”) to outperform.
