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Market in Pictures – Issue #6

February 16, 2021 Applied Finance

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]

Market in Pictures – Issue #5

January 25, 2021 Applied Finance

A market-beating investor on Charles Schwab’s exclusive list of top-tier mutual funds explains why he believes traditional value investing never really worked — and shares his strategy for identifying the best cheap stocks https://t.co/KqVP0FbjpA — […more]

Concentration of Top 5 Market Cap Stocks in S&P 500 (Update Jan. 2021)

January 19, 2021 Applied Finance

The five largest stocks in the US (AAPL, MSFT, AMZN, GOOGL, FB) dominated S&P 500 performance in 2020, returning 56.0% over the course of the year on a capweighted basis, while all other US stocks returned 15.0% in aggregate. We can further examine implied expectations with VE models to the right. Since the end of 2020, TSLA has passed FB to claim the fifth largest market cap; we have also included insight into TSLA’s valuation characteristics following their recent inclusion and large allocation in the S&P 500. […more]

Looking Backward and Forward – Q4 2020 Review

January 11, 2021 Applied Finance

Incorporating the latest 10 Yr US Treasury yield into our market derived discount rate calculation, the Equity Risk Premium (ERP) per our estimates, is currently at ~6.8% for nonfinancial US firms in nominal terms, significantly higher than the historical median and average of ~4.5%. With the risk free rate historically low, equity investors seem to be demanding a fair amount of protection, though the market appears overvalued despite the high ERP. […more]

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