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]
In preparation for the upcoming earnings releases for US megacap stocks over the next two weeks, Applied Finance would like to take inventory of the intrinsic value and implied expectations characteristics of the short list […more]
We originally wrote this note in December, 2020, but it serves as a timeless reminder that understanding intrinsic value and wealth creation is critical to successful investing. From the Applied Finance Team – Happy Holidays. […more]
Forward interest rates and the long-term inflation expectations they contain is the critical rate watched by Federal Reserve policymakers. The Federal Reserve will view itself as “failing” if it cannot help inducing sustained long-term inflation of 2%. […more]
Excess Intrinsic Value Motivation Applied Finance’s Valuation Beta Research Paper studies the unique characteristics of the Intrinsic Value Factor™ in asset pricing. We believe this research is an important contribution to asset pricing literature, not only […more]
Over the last few quarters, we have monitored the poor valuation characteristics of dilutive stocks. The top 30% Financing Yield stocks have outperformed their bottom 30% peers by 0.8% in the Russell 1000 and 5.4% […more]
Given the impact that these stocks have on cap-weighted benchmarks, we want to continue to review their valuation prospects on a quarterly basis. […more]
Looking into the next couple of quarters, we expect US economic growth to remain strong. Consumers’ balance sheets remain in great shape and more workers will be returning to the labor force. Purchases delayed due to supply constraints or availability issues will likely be pushed to 2022, resulting in more even economic growth rates in 2021 and 2022, rather than showing a big fall off next year as previously expected. […more]
Historically, High momentum stocks have done quite well, with the top quintile outperforming the bottom in many years. In 2020, the High momentum group did significantly well in the early part of the year, while that trend reversed in the second half and into 2021. YTD, we’ve seen the largest reversal in the momentum factor since 2016, with High momentum companies underperforming Low firms by over 15%. […more]
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