Posts filed under “Valuation”

S&P 500′s Dubious Market-Cap Weighted Anniversary

 

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spx sectors

 
 

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

40 utilities

40 financials

20 transportations

 

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   

 
 
 

Category: Analysts, Index/ETFs, Markets, Valuation

Three Commandments of Stock Valuation

Many metrics can be used to value markets. Which should you trust? Barry Ritholtz Washington Post, March 7 2015       “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” — John Kenneth Galbraith Let’s take a look…Read More

Category: Apprenticed Investor, Investing, Valuation

Are Stocks Cheap or Expensive? How to Tell

>   This morning in my Sunday Washington Post Business Section column, we look at the issue of how expensive U.S. stocks are. There are several ways to determine this, fraught with the potential for error. If you want to determine how cheap or expensive the stock market is,  I suggest three commandments to consider: ●Thou shalt…Read More

Category: Apprenticed Investor, Investing, Valuation

Nasdaq 5000 and Beyond?

Barron’s looks at Nasdaq’s momentum and the zombie apps no one talks about.

 

 


2/20/2015 4:13PM

Category: Investing, Technology, Valuation, Video

The 700 Billion Dollar Company

Source: WSJ

Category: Digital Media, Technology, Valuation

Emerging-Market Stocks = Cheap

Emerging-Stock Bargain Seen in Commodity Users: Chart of the Day By David Wilson, Bloomberg   The CHART OF THE DAY illustrates how Emerging-market stocks are becoming cheap enough relative to U.S. shares. Jack Ablin, chief investment officer at BMO Private Bank compared the price-to-sales ratios for the MSCI Emerging Markets Index, which tracks shares of companies…Read More

Category: Economy, Markets, Technical Analysis, Valuation

Would you pay $100 million dollars for this Grilled Cheese Food Truck?

If you have been a regular reader of mine, you are probably familiar with several things about me: First, you know I have been a steadfast bull during the entire rise in the stock market. It isn’t that I am such a genius or especially lucky. I just would rather not guess when the bull…Read More

Category: Contrary Indicators, Psychology, Valuation

Facebook Valuation Tops $200 Billion

Source: Bloomberg Visual Data

Category: Digital Media, IPOs, Valuation, Web/Tech

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…Read More

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