Employing a strategy that is a little different from many of its peers, the value investor secured a mandate from GPIF — the world’s largest pension — in October, following a due diligence process that started that summer. Value has been underperforming since the global financial crisis, but started to come back in 2021. […more]
Those latest earnings forecast, are implying an economic soft-landing, not an outright severe recession. Historically, the SP500 EPS change during a recession was a decline in the high teens. That said, with the SP500 losing nearly a quarter of its value YTD, investors clearly have embraced less robust prospective earnings than what the consensus estimate is suggesting. […more]
In October 2020, Applied Finance published a research paper (Valuation Beta) that studied the attributes of a comprehensive intrinsic value framework in the context of asset pricing studies popularized by Fama French’s expansion from the […more]
Looking Back and Forward Recap of 22Q2: During the 2nd quarter, US equity markets lost 17% of their value, with comparable declines between the Large and SMID market capitalizations. Underpinning the big declines are: 1) accelerating inflation, 2) lost confidence in the Fed’s ability to tame inflation, 3) growing fear that a US recession, or worse long-lasting stagflation is inevitable. […more]
Finance is in a funny place now. Corporate finance operates under the guidance of the NPV Rule. NPV Rule provides the following guidance to corporate executives: To the extent a corporation sources investment opportunities with […more]
This article first appeared on The Market, April 17th, 2022 To invest successfully, we have to get a differentiated understanding of a company’s valuation. With this premise in mind, finance students at the University of […more]
First released 4-6-2022 Recapping the quarter: Looking back at the first quarter of 2022, January was largely a traditional risk-off month when the SP500 index lost nearly 10% of its value by January 27, driven […more]
US Small Cap indices currently allocate to overvalued, dilutive firms at elevated levels last observed in the tech bubble. This poor allocation of capital corresponds to a noticeable decline in market efficiency between prices and […more]
Looking back: both the US economy and corporate America earnings were much stronger in 2021 than initial expectations.
Looking forward: Equities will likely face volatility in the months ahead, however, higher interest rates are not a death spell to the equity market. Higher interest rates are good for the US economy right now, and what is good for the economy will eventually be good for corporate America.
Having worked with hundreds of investment managers, analysts and advisors over the past 25 years, I know valuation is an interesting topic. Virtually every investment manager and analyst acknowledges its significance, but almost instantaneously begins justifying why they don’t give it much importance in their process. I’ll note that rarely do investment professionals offer as the reason an admission that they have not really devoted the immense time and study required to deeply understand valuation. I’ll provide my perspective on what I will call common myths/misunderstandings, then I’ll turn to a few insights from our Intrinsic Value Database™ and provide our perspective to current market conditions. […more]
Copyright 2023 Applied Finance - Disclaimers: Applied Finance refers to Applied Finance Capital Management and its Affiliated Companies; Applied Finance Group (AFG) and Applied Finance Advisors (AFA).