Posts filed under “Valuation”

Enjoy Your Weekend Reading on the CAPE

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 Faber, Jeremy Siegel, Salil Mehta, Stephen E. Wilcox, Doug Short, Wade Slome, Erik Kobayashi-Solomon, Ben Carlson and Jesse Livermore. If you want a crash course in CAPE, spend the weekend digesting what they have to say.

Today, I want to focus on the pros and cons of CAPE, giving airtime to all sides of the argument. My main interest in CAPE has more to do with behavioral issues such as confirmation bias by those who cherry pick CAPE as their preferred valuation metric when it suits their market position.

Let’s start with a few words about valuation and timing. Cyclically Adjusted Price to Earnings uses the prior 10 years of trailing per-share earnings rather than just the previous four quarters. This reduces the short-term volatility. In theory, it should include at least one full business cycle, and possibly more. Shiller has said that he was trying to develop a valuation metric that would tell an investor whether equities were likely to outperform their median returns during the next decade.  Continues here

 

 

 

 

 

 

Category: Analysts, Data Analysis, Valuation

Weekendend Homework: Sources & Research on Shiller’s CAPE

I have a fairly long piece coming out looking at CAPE, but for those of you interested, here are the research and resources I used: Fixing the Shiller CAPE: Accounting, Dividends, and the Permanently High Plateau   PHILOSOPHICAL ECONOMICS December 13, 2013 @Jesse_Livermore An Old Friend: The Stock Market’s Shiller P/E, Clifford S. Asness, Ph.D., AQR’s…Read More

Category: Markets, Philosophy, Valuation

Who’s Afraid of Shiller’s CAPE?

Category: Think Tank, Valuation

The Billion-Dollar Startup Club

Click for an interactive graphic. Source: WSJ

Category: Digital Media, Valuation, Venture Capital

What makes Analysts Cover Stocks?

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

Category: Analysts, Valuation

Rising Revenue + Increased Profits = Bull Rally

click for larger chart     I am off to Maine today for a few days of fishing and economic debate and drinking. Before I go, I wanted to share a chart we pulled together in the office yesterday from the BBRG terminal. It was in response to the usual statement “This rally is driven…Read More

Category: Earnings, Federal Reserve, Valuation

What If Apple Products Were Their Own Companies?

Slate‘s Jordan Weissmann puts Apple’s product lines into perspective versus other large companies (Tech or not).

iPhone revenues alone eclipse that of either software behemoth Microsoft or online retail giant Amazon. Businessweek (September 2013):

If the iPhone were its own company in the Standard & Poor’s 500-stock index, iPhone Inc. would outsell 474 of 500 companies; iPhone’s $88.4 billion in annualized revenue tops 21 of the 30 component companies in the Dow Jones industrial average—it would be the ninth-biggest stock in the Dow 30.”

Consider these two product lines:

iPhone = Google + eBay

iPad = Yahoo + Facebook + LinkedIn + Twitter + Group + Tesla

Truly insane.

 

 

 

 

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Category: Consumer Spending, Technology, Valuation

Mebane Faber’s Talk at Google on Global Value


Source: Mebane Faber Research

Category: Investing, Valuation, Video

How Expensive Are Stocks? (Not Terribly)

cick for bigger chart Source: JP Morgan   It has become commonly accepted that stocks are very expensive, overbought and perhaps even in a bubble. JPMorgan Chase & Co.’s latest quarterly chart book (you can download it here) takes issue with those conventions. As you can see from the chart above, U.S. equity prices closely…Read More

Category: Digital Media, Valuation

World’s Cheapest Stock Markets

click for ginormous version Source: The Telegraph   Nice graphic from The Telegraph, showing relative valuations around the world, using P/E ratios, CAPE, and Price to Book. To be named “cheap”, markets had to be trading below their own historic valuation across all three measures. As the map to the left shows, only a handful…Read More

Category: Investing, Markets, Valuation