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UPDATE: Market Valuation Analysis – 03/23/2020 Data

March 24, 2020 AppliedFinance

The uncertainty of the timeline for a “return to normalcy” has created liquidity concerns across practically all economic sectors. Companies of all sizes and levels of financial strength are drawing on open lines of credit to weather worst case scenario contagion estimates.  Commercial landlords will likely see missed rent payments with little demand to lease shuttered storefronts, while rising unemployment may lead to a spike in residential mortgage and rental delinquencies; this has clearly impacted the recent performance of financial stocks, REITs and mortgage insurers.

To continue to help our clients navigate the economic impacts of the pandemic, we have updated market performance data from the previous write-up to include last week’s historic sell-off […more]

Emotional Unease Creates Generational Wealth Opportunity

March 19, 2020 AppliedFinance

Only in 2008 have valuations been as attractive as now. Today, the market is essentially pricing in 0% sales growth over the next five years, not as harsh as the -15% priced in during the 2008 lows, but very harsh compared to the expected 20% to 30% growth these firms have typically delivered over a five year period. Unlike 2008 there will not be liquidity issues driving economic decisions and panicking investors. This is a confidence crisis similar to 9/11. As medical policy catches and surpasses the virus, confidence will return and economic activity will march forward. Already, in China, restaurants have reopened to crowds, and society is returning to business as usual. […more]

COVID-19 Pandemic and AFCM Strategies Update

March 18, 2020 AppliedFinance

The past four weeks have been surreal. The S&P500 lost nearly 30% of its value with extreme volatility day in and day out, and the busiest cities in the US and most of Europe are in lockdown. What happened in China is happening to a lot of us, and we didn’t expect that. No country can fully prepare for events like this, unless they have experienced something similar before. Singapore, Taiwan, Hongkong, and South Korea have done a commendable job responding to Covid-19, possibly because they had the painful experience dealing with SARS (2003) and learned from it. The US […more]

We Continue to View Large Cap Stocks Favorably

March 13, 2020 Christoph Gisiger

Christoph Gisiger:

The crash came out of nowhere: In just a few weeks, stocks have entered bear market territory, investors are facing the biggest setback since the financial crisis. However, Rafael Resendes doesn’t expect a similar scenario like the Great Recession of 2008/09. The Co-founder of the value investment firm Applied Finance warns against panic selling and thereby missing powerful rallies when the outlook brightens up. […more]

Market Valuation Analysis – Take advantage of opportunities that are now available in the marketplace

March 13, 2020 Applied Finance

Applied Finance has aggregated recent performance over the last several weeks to help fully understand the recent market drop’s impact through various sector, style, factor, and industry lenses. We have also compiled updated percent to target median charts to better understand current valuation levels normalized against historic averages. We present this data today with limited commentary, as we will explore this in much more detail in next month’s quarterly write-up. In the meantime, a few main observations […more]