Commentary

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]

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]

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]

The US equity markets have fallen sharply the past week on concerns of the coronavirus disease 2019. This novel coronavirus affects the respiratory system, was first identified in Wuhan, China more than two months ago, […more]

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]

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]

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]