Posts filed under “Valuation”

Buffett’s Favorite Indicator Is Worthless as a Buy/Sell Signal

2-21-14 Market Cap - 1
Source: The Chart Store

 

 

Today I am going to make a somewhat nuanced argument about the dangers of indicators and metrics for valuing stocks.

Let’s use arguably the greatest investor of all time, Warren Buffett, and what he describes as, “probably the best single measure of where valuations stand at any given moment.” Buffett’s favorite metric compares the total price of all publicly traded companies to gross domestic product. This metric can also be thought of as a way to judge the valuations for all U.S. companies relative to the total amount of U.S. economic activity. According to Buffett, when the resulting figure is above 100 percent, stocks are overvalued.

A Google search for “Warren Buffett’s favorite indicator” will return several million hits and you can find dozens of articles citing the indicator — it is most often used to prove that stocks are pricey.

The reality of its meaning is much more complex . . . continues here

Category: Really, really bad calls, Technical Analysis, Valuation

WhatsApp

He’s creatively bankrupt. Recent studies show that few post and no one clicks through on likes, what’s a poor boy to do? Buy something with all that Wall Street money to deflect criticism as those prognosticating and investing miss the point. Steve Jobs is a hero not because he started the computer revolution, but because…Read More

Category: M&A, Technology, Valuation

If Company Market Caps = Countries’ Listed Firms

This map matches the value of an entire countries’ listed firms (in total) versus the cap of a single company. Source: Economist

Category: Digital Media, Valuation

Why ‘Peak-Earnings Models’ Are Nonsense

Lately, there has been a spate of research, analysis and commentary telling us that earnings are at a cyclical high and must revert. Stock valuations, therefore, are elevated and earnings will soon begin to fall, bringing stocks down with them. This is neither a credible analysis nor a method of valuing equities. Rather, it is…Read More

Category: Earnings, Investing, Really, really bad calls, Valuation

Assets versus Prices

Josh has an excellent post up, titled Don’t Hate the Asset, Hate the Price, that makes several important points. I want to reiterate and expand on them here. Some of these are lynchpins of an investing philosophy I have been espousing for many years. Its a broad discussion on price and value, and I think…Read More

Category: Investing, Philosophy, Really, really bad calls, Valuation

BCA U.S. Equity Valuation Index

click for larger graphic Source: BCA Research   There seems to be an increasing concern that stocks have become wildly overvalued, especially in light of rising interest rates. However, somewhat overvalued U.S. equity prices can continue to rise if price/earning multiples keep expanding.   Continues here      

Category: Markets, Technical Analysis, Valuation

Profitibility at the World’s Biggest Tech Firms

  click for ginormous graphic via Pando Daily  

Category: Digital Media, Earnings, Technology, Valuation

A Few Words About Valuation

A few weeks ago, Yale Professor Robert Shiller won the Nobel prize for his work on irrationality and inefficiency of markets. Since then, we have been treated to a plethora of stories on some of his other work — especially so-called CAPE, Shiller’s measure of long term valuation. The general consensus seems to be that…Read More

Category: Investing, Trading, Valuation

Apple’s Rebound Q in One Giant Chart

click for larger graphic Source: TechCrunch

Category: Digital Media, Earnings, Valuation

Lagged P/E Ratios: Shiller Cape vs NIPA

click for ginormous charts Source: JP Morgan   JP Morgan observes: “Shiller P/E shows the market to be overvalued, but not as extreme if you use the NIPA data.” I’ve never used the NIPA data, so I have no real opinion on it.  The two charts look directionally similar, but different in terms of magnitude….Read More

Category: Data Analysis, Earnings, Valuation