Irrational markets are easy to beat? You would think so. But, to quote Yogi Berra, “In theory, theory and practice are the same. In practice, they’re different.”

Think about an incredibly cheap stock. With the benefit of hindsight, we can look at Fortescue Metals in 2016. Iron ore prices had plunged 30% over the year but FMG had offset that fall with a 43% reduction in operating costs and so had increased profits for the year. Despite that, FMG was still trading at under eight times Earnings Per Share. It turned out to be the bargain it looked. Within a year, the price w...