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Is the S&P 500 a Value, Core, or Growth strategy?

August 19, 2020

Is the S&P 500 a Value, Core, or Growth strategy? It depends.
The push in megacap stocks has caused index concentration to be at the highest levels since the 1970’s. Additionally, the Covid-19 pandemic and drop in interest rates has led investors to favor Growth stocks so far this year, exacerbating the trend. […more]

Growth Stocks Approaching Valuation Levels Last Observed During Tech Bubble

August 11, 2020

While we rarely make huge market calls and remain reluctant to do so at this point, its worth noting that growth stocks are trading at below -1.5 StdDev from historical normal levels signaling a significant move outside of normal range. This is especially noteworthy, as the growth relationship in the Russell 1000 is now at levels last observed in the peak of the tech bubble. […more]

Shareholder Yield in the Era of Low Interest Rates

August 4, 2020

Investors too often focus solely on dividends, when they should consider a combination of dividends and share repurchases. In a decade-long spell of low interest rates, public companies have strong incentives to reconsider their capital […more]

Excessive Crowding of “Low Risk” Stocks: Size & Leverage Analysis

August 4, 2020

“High risk” stocks, based on smaller market caps and higher levels of leverage, outperformed the overall US market by nearly 11.4% on a cap-weighted basis in Q2. This is attributable to improving investor expectations regarding a “v-shaped” recovery following significant underperformance of “high risk” stocks in 2020 Q1 by -22.0%. […more]

Concentration Impact on Style Indices

July 30, 2020

Big 5 companies surge in index concentration… what will be the effect on style boxes and cap-weighted portfolios?

The recent surge has notable impacts on commonly-used style index construction methodologies. Due to the increased reliance on passive allocations, investors should be aware of the significant distortions regarding style index diversification and skews in the classification assigned to individual stocks. […more]

Valuation and Concentration of Top 5 Market Cap Stocks in S&P 500

July 23, 2020

Are the Big 5 stocks in S&P500 (FAAMG) overvalued?

Despite concentration levels unseen since the early 1970s, this group of 5 stocks currently offers reasonable valuation characteristics. The valuation characteristics of these five stocks warrants ongoing monitoring to ensure valuation does not deteriorate. […more]

The False Bargain of Passive Investing

July 14, 2020

Today the irony continues, as the intellectual foundations in financial economics that underpinned Bogle’s incredible success are much less robust than they appeared in the early 70’s, yet the push for passive investing is stronger and more fervent than ever. For proactive, process-oriented, intelligent advisors this will create a great opportunity to distinguish yourself from the growing herd of “commodity” advisors who preach little more than fee minimization, rather than alpha generation or negative alpha avoidance. […more]

Will the Mega Cap Dominance Continue?

July 10, 2020

The largest few companies in the US have dominated performance over the past 4-5 years. The recent Covid-19 pandemic has intensified this trend in recent months. In particular, the largest five companies the in US […more]

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