When one talks about market efficiency, it is important to distinguish between ideas whose implications are obvious and consequently travel quickly and ideas that require reflection, judgment, and special expertise for their evaluation and consequently travel slowly. The second kind of idea — rather than the obvious, hence quickly discounted insight relating to “long-term” business developments — is the only meaningful basis for “long-term investing.”

If the market is inefficient, it will not be inefficient with respect to the first kind of idea, since by definition the first kind is unlikely to be misevaluated by the great mass of investors. If there is any market inefficiency, hence any investment opportunity, it will arise with the second kind of investment idea — the kind that travels slowly. On the other hand, many investors argue that research devoted to identifying the second kind is impractical because the market consensus, based as it is on the opinions of investors lacking the special expertise required, will never respond to it.

Whether the great mass of investors are capable of responding to an investment idea, however, is irrelevant. An analyst’s opinion of a security’s value is the price at which, risk-adjusted, the return on that security is competitive with the return on other securities in the market. If an analyst’s idea correctly reveals a security as undervalued, it reveals a security that, at its present price, offers a superior long-term return — whether or not the market consensus ever responds to the idea. The mere inclusion of securities based on such ideas will assure superior performance.