Posts filed under “Valuation”

Spec-Tech Crash Is a Good Thing

Today, I hope to explain how the crash of the speculative tech names is a positive.

Last month, we noted that “High-Flying Tech Stocks Were Coming Back to Earth.” Some of the companies we reviewed then included Twitter Inc., LinkedIn Corp., Netflix Inc., Tesla Motors Inc., Priceline Group Inc., Google Inc. and Facebook Inc. Since then, shares of these companies have fallen even further.

Have a look at how much these high fliers have declined from their recent all-time highs (all returns are as of yesterday’s close).

 

Source: Ritholtz Wealth Management
Source: Ritholtz Wealth Management

To borrow from Martha Stewart, This is a good thing.

To anyone concerned about a speculative tech bubble, as some seem to be, then letting the air out of that bubble should be a positive, right? A reduction of euphoria reflects a return to reason.

Let’s take this exercise a step further, and cherry-pick the hot and not so hot names from 2013.

Take a look at the next chart. The stocks on the green half are those of conservative health-care and consumer-staple companies. They are doing well this year, but they underperformed in 2013.

The other half is last year’s all stars.

The average return of the conservative boring green companies in 2013 was 22 percent, a gain equal to about two-thirds of the stock market’s rise. But this year’s losers were monsters last year, with an average a return of 174 percent.

 

Source: Ritholtz Wealth Management
Source: Ritholtz Wealth Management

What conclusion can you draw from this? Hot money is becoming downright respectable (or at least is trying to). Markets are going through a rebalancing, with money leaving the high-flying stocks with stretched valuations and finding a home in shares of companies with higher dividends and more reasonable price-earnings ratios.

This is something to embrace, not reject.

 

Originally published here

Category: Investing, Psychology, Technology, Valuation

If Stocks Go Up, Must They Always Come Down?

What’s gone up won’t always come down Barry Ritholtz Washington Post, April 20 2014     U.S. equity markets made substantial gains last year. The Standard & Poor’s 500-stock index, the traditional benchmark for equities, was up 29.6 percent. Add in dividends, and it’s well over 30 percent. Technology and small-cap stocks did even better, with…Read More

Category: Apprenticed Investor, Investing, Technical Analysis, Valuation

Apple In Numbers

How many iPads are sold every minute? Why did The Beatles sue Apple? How much money has Apple got stashed abroad?   Explore more visuals like this one on the web’s largest information design community – Visually.  

Category: Technology, Valuation

It’s a Tech Bubble! Unless You Care About Earnings and Valuations

Earlier this week, Greenlight Capital hedge fund manager David Einhorn reignited the bubble debate that we have spilled so many pixels dissecting. The shorter of Lehman Brothers and the New York Mets fan said in a quarterly letter to clients “we are witnessing our second tech bubble in 15 years.” The Bubble Chatter is nothing…Read More

Category: Hedge Funds, Psychology, Short Selling, Valuation

Asness: Stocks & Bonds Are Expensive

Cliff Asness, founder & CIO at AQR Capital Management, discusses his investment strategy, how geopolitical risks influence markets, his biggest market concern and why he believes we are not in a tech bubble on Bloomberg Television’s “Market Makers.”

Long-Term Market Outlook Concerns Me Most: Asness

Bloomberg April 15

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Bloomberg’s Michael McKee and Cliff Asness, founder & CIO at AQR Capital Management, dig deeper into consumer prices for March and weigh the expense of bonds and equities on Bloomberg Television’s “Market Makers.”

Stocks and Bonds Both Equally Expensive: Asness

Bloomberg April 15

Category: Investing, Valuation, Video

How Pricey Are Equities?

One of the elements of modern punditry that continually surprises me is the insistence that stocks are grossly overvalued. As I have written repeatedly, stocks are more or less fully valued. However, since we don’t know what next year’s earnings are going to be, stocks can get cheap or expensive pretty quickly. It depends on…Read More

Category: Investing, Valuation

Are Stocks Pricey or Cheap?

How to know whether stocks are cheap or pricey Barry Ritholtz Washington PostTerms March 23, 2014     Last week, the Fed shared some widely expected news: It will taper more — keeping up a policy of slowly reducing its bond-buying program with the goal to wind it down by year’s end. It has telegraphed…Read More

Category: Apprenticed Investor, Investing, Valuation

Shiller: On Bubbles & Busts

In an interview with contributor David Wessel, Yale economist Robert Shiller describes his thoughts on what actually drives markets—and recalls his encounter with Alan Greenspan just before the Fed chairman’s “irrational exuberance” speech.

Category: Psychology, Valuation, Video

Are Stocks Cheap or Pricey?

>   My Sunday Washington Post Business Section column is out. This morning, we look at whether stocks are cheap or expensive. The print version had the full headline Are Stocks Cheap or Not? How to Tell. The conclusion is surprisngly middle of the road. Here’s an excerpt from the column: “To know whether stocks…Read More

Category: Apprenticed Investor, Investing, Valuation

When Markets Are Wrong

  My favorite chart on the website this week (so far) comes from Matthew Klein’s column: Is Yahoo’s Business Worth Less Than Nothing? And it’s filled with informative details. Yahoo! Inc.’s total value is represented by the first bar. If you subtract the value of Alibaba Group Holding Ltd. and Yahoo! Japan Corp. you are…Read More

Category: IPOs, Valuation