Given the significant volatility over the previous 12 months in overall market returns and style-based indices, we believe it is helpful to provide ongoing guidance related to the aggregate intrinsic value characteristics of popular indices […more]
In our Valuation Beta working paper, we emphasized the valuation vs cheapness contrast between intrinsic value and book to price (HML) classifications. This highlighted that “cheap” HML classifications unsupported by intrinsic value were a source […more]
In just 12 short months, $8.3T flooded into the US Economy and the country is spending much more than current tax revenues allow. The bill will come due, and it will begin to come due soon. 2022 now appears to be the most likely start for tighter policies. […more]
We stressed in our 20Q4 newsletter that over longer time horizons, since the mid-90s, Large and Growth factors have not consistently generated alpha. This observation was quickly proven true YTD, as Large and Growth significantly lagged Small and Value. While those traditionally defined style factors are helpful in explaining short-term performance, we believe in the long term, it is valuation that delivers alpha. […more]
With massive stimulus and deficit spending, rising inflation concerns have become a concern for investors. It is often assumed that higher levels of inflation bode well for the relative performance of value stocks. We explore the relationship between inflation and value stocks and why this link may not be as strong as investors might think.
Navigating allocation decisions in the face of rising inflation requires more careful stock selection than the current set of passive investment vehicles or factor-based alternatives are equipped to deliver. […more]
Tesla and Forced Opinions The market can be a cruel arbiter, eventually compelling all to have an opinion, kicking and screaming they might complain, but everyone is forced to place a bet. For much of […more]
Many investors have abandoned their security analysis discipline in the search for low-cost investment products, and most academic research has applauded that decision for decades. Applied Finance has established an extensive out-of-sample systematic track record to confidently defy these trends with a disciplined valuation approach. Because of this, we believe investors benefit from valuation-based investment decisions, not only at the individual stock level, but also by aggregating data across entire investment landscapes. While notable regime shifts between value and growth preferences can be studied with an intrinsic value framework, we encourage investors to consider a comprehensive valuation metric in all of their stock selection, portfolio construction, and asset allocation decisions. […more]
Joe Weisenthal and Tracy Alloway from Bloomberg Markets, recently interviewed Rafael Resendes on How Most Value Managers Are Getting It All Wrong. Below are the links to listen to the interview. Link to Podcast on […more]
This article first appeared on RealClearMarkets.com February 17th 2021 “All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.” Arthur Schopenhauer Our last […more]
Jeff Bezos to Quant “value” investors- I’m thinking of expanding $amzn beyond books – should I invest in my business? They all say – No Don’t!!! Our models show companies that invest in their business […more]
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