Flutter on mispriced US equities could prove a winner

There are three things one needs to know in order to excel in gambling:

1. Knowing the 60-40 end of a proposition
   
2. Money management
   
3. Knowing yourself
   

To understand whether the odds of the financial markets are mispriced at any point in time, one needs to use consensus forecasts for a company's key value drivers. With these expectations, one would be able to assess the probability of the company meeting those expectations by looking at the fundamentals.

The author has noted three observations that show that the US equities are mispriced:

1. Ratio of cash flows to net income is at very healthy levels. This creates strong balance sheets for companies.
   
2. The equity risk premium, as a multiple of risk-free rate, is pretty low compared to historical data.
   
3. Expectations for future value creation are near an all-time low, in spite of the fact that returns on invested capital, a prime measure of value creation, are at an all-time high.