Posts filed under “Analysts”
The Standard & Poor’s 500 Index is market-capitalization weighted, meaning that companies with higher stock-market valuations have a bigger influence on the index. There has been a cottage industry of criticism about this structure. Recently, it has led to a new world of fundamental indexing and so-called smart beta, or seeking ways of using the components of the index to outperform the index itself.
The S&P 500 wasn’t always set up this way. This is a good time to think about the subject, because today marks the anniversary of the index’s overhaul, giving us the structure we have now.
According to the S&P 500 2001 Directory (hat tip to Jason Zweig’s This Day in Financial History), the benchmark index for large cap U.S. stocks looked very different than it did before this day in 1988.
Back then the index was made up of:
400 industrial stocks
This seems like it was an effort to mimic Dow Jones, which had three big indexes — the Industrial Average, the Transportation Average and the Utilities Average. According to the Dow Jones Industrial Average Fact Sheet, the Industrial Average was designed “to represent large and well-known U.S. companies, cover[ing] all industries with the exception of Transportation and Utilities.” Having been around since the late-19th century, it had become the benchmark for measuring the U.S. stock market.
Continues here: The S&P 500′s Dubious Anniversary
Apple’s first-quarter earnings were blow-out numbers. Far beyond what anyone forecast, the figures show Apple arguably had the single-greatest quarterly performance in U.S. corporate history. A quick overview: Apple’s net profit of $18 billion is an astonishing gain of 38 percent over the already-huge $13.1 billion in the same quarter last year. (So much for…Read More
Paul Macrae Montgomery, best known as the originator of the Time Magazine Cover Indicator, and for popularizing the Hemline Indicator of the stock market, died this weekend. He was 72. I was fortunate to have had several conversations with Mongomery over the years. He was humble and soft spoken but he took delight in…Read More
Until, not so long ago, Morgan Stanley’s Adam Parker was one of the most bearish analysts on the street. He had consistently violated one of the first rules of the market: Never mix politics with investing. Following last year’s 30% S&P 500 rally, he has had a change of heart. He now has a 3000…Read More
In our discussion of Mr. Market, we made passing reference yesterday to CAPE, Yale professor Robert Shiller’s 10-year cyclically adjusted price-earnings measure. This led to quite a conversation via a series of e-mails and Twitter posts from an assortment of analysts and asset managers. I received research from or by Cliff Asness, Michael Kitces, Mebane…Read More
David J. Merkel, CFA runs his own equity asset management shop, called Aleph Investments, running separately managed stock and bond accounts for upper middle class individuals and small institutions. He has a background as a bond manager and life actuary and hold bachelor’s and master’s degrees from Johns Hopkins University. While at RealMoney,…Read More
If you work in finance, you will invariably come across an example of single-variable analysis. Almost daily, we see terrible examples of this sort of analytic error, rife with logical weakness, yet offered with the highest degree of certainty. The way this works is as follows: Some ominous data point will be shown, along with…Read More