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February 22, 2020


    The Valuation 50 portfolio is a long strategy comprised of approximately 50 U.S. traded large cap equity securities believed to offer superior total returns over long-term investment horizons. The equity securities have attractive valuations and are selected to provide broad economic sector exposure. [...more]


    The Valuation Dividend portfolio is a long strategy composed of approximately 25 to 35 U.S. traded large cap equity securities. It is designed to provide capital appreciation, income, and superior total returns over long-term investment horizons. In selecting the equity securities, the strategy seeks companies with attractive valuations and sustainable dividends, while also attempting to diversify the portfolio across the economic sectors. [...more]
  • Avoiding the Disrupted and Attractive Dividends

    Avoiding the Disrupted Overcomplicating things is seldom on the path to investment success. The stunning ascension of Tesla has confounded, in a manner no less than stupefying, the investment thesis of many. We don’t profess [...more]
  • Semiconductor Stocks and Banks in (not of) America

    Pausing for a look down from Semiconductor Stocks

    Technology stocks in general, and semiconductor stocks in particular had a stellar performance in 2019 with a particularly strong finish during the last quarter. What can one expect for 2020? While the old adage that forecasting is hard, particularly with respect to the future, seems true; we can say that standing here in the present there appears to be a lot of good fortune prices in a number of semiconductor stocks. […more]

  • Reclaiming Value & Restoring its Place in Active Management

    The insights delivered by this study are truly fascinating.  On one hand, the evidence that price multiples are incomplete in forming a definition of value is obvious, and this should align with intuition.  If broader market participants heed this advice, this study will have been a noble effort to improve the flow of accounting information and analyst forecasts into market prices.  On the other hand, there has never been obvious justification for measures of cheapness to define value in the first place.  Many investors simply use these factors out of convenience or tradition, while many others invest in products built upon them with little understanding of the classification error they introduce.  […more]

  • Looking Backward and Forward Q4 2019

    2019 was a triumphant year for the US large cap equity market, with the S&P500 index up 31% on a total return basis. The resolution of two major concerns in the year, namely the US [...more]
  • Valuation vs. cheapness Investing

    Despite decades of academics and practitioners promoting the ”value factor”1, it generates marginal to no long-term alpha. We believe four reasons have contributed to slow the discovery process from the current accepted “value” regime (low price to something) towards a more robust and realistic true value regime (worth measured independent of market price and focused on the value of future cash flows).
    1. No theory.  There is no clear link between commonly used “value” variables and true value.  Yet academics and practitioners have developed no viably accepted competing perspective to explain future returns […more]

  • Faster And Cheaper Aren’t Always Better

    100 mph pitchers are a rare and treasured commodity, simply because they have been among baseballs’ most effective players. The mention of Randy Johnson, Nolan Ryan, JR Richardson, Bob Feller, all elicit reverence for their amazing careers. Yet what of Steve Dalkowski who Ted Williams once faced off against and said – I could not see the ball […more]

  • The Gross Profitability Trap

    “But this time, it’s different!” More foolish words are rarely spoken in the financial industry, but they always seem to find their way back into the stock market lexicon. A firm’s intrinsic value should always be a function of discounted future cash flows that incorporate a comprehensive understanding of profitability, growth, competition, and risk. Occasionally, alternative approaches can find favor in enough market participants’ stock selection to distort the foundational understanding of firm value. […more]

  • Economic Margin – Removing Market Noise

    A corporate performance metric should provide insights into what a firm is worth. Most money managers utilize common earnings-based measures of corporate performance and value, which are suspect and easy to manipulate. Applied Finance developed the Economic Margin (EM) framework to remove the noise inherent in accounting data.

    Traditional accounting-based valuation methods provide an incomplete view of a company’s value by not accounting for the investment needed to generate the earnings, cost of capital, inflation or cash flow. […more]