Posts filed under “Valuation”

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 are cheap or pricey, we typically look at price-to-earnings ratio. Valuation is a tougher question than many folks realize. People forget that although we can pinpoint the price, we can only guess at future earnings. The past isn’t much help: It simply tells whether a market was pricey or cheap.

Valuation today is a function of price relative to future prospects, and that is an unknown. Sure, we have analysts’ consensus estimates as to future revenue, earnings and cash flows, but truth be told, these are at best an informed guess. A McKinsey study found that on average, analysts’ forecast were too bullish by nearly double. (The exception was at market lows, when they were too bearish). So keep that in mind whenever you think about valuations.”

Its a good exploration of various metrics.


Are Stocks Cheap or Not? How to Tell
Barry Ritholtz
Washington Post, March 23, 2014

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

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

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.”…Read More

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


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