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The Roaring 2020’s

December 11, 2020

The 1999 Tech Bubble was an extraordinary period. “Fundamentals don’t matter” “It’s a tech company, not a manufacturer” “Past a certain point of profitability, there’s zero chance the call options tank back to worthless” However, […more]

Market in Pictures – Issue #4

December 10, 2020

We venture that few investors would have foreseen stocks at these levels had they known 2020’s timeline of events in advance. We have little if any idea on irrational exuberance or market tops but have some thoughts on where to, and where not to, look for value. […more]

Demystifying the False Choice of Value and Growth Investing

November 19, 2020

Many investors have chosen sides in the partisan “value vs. growth” debate to define their investment ideology and market their products. Instead of choosing sides in this arbitrary debate, since 1995, Applied Finance has advocated for a robust valuation-centric philosophy emphasizing economic principles centered around profitability, growth, competition, and risk. Equipped with this point of view, it is clear that value and growth managers are both aware of important considerations when estimating intrinsic value, but staunch advocates of either perspective suffer from incomplete frameworks. Value advocates are correct that valuation should matter, but commonly used methodologies suffer from poor ex-post performance and lack a robust economic justification, especially when a dividend discount model tautology assumes that negative growth unconditionally generates positive stock market returns. Growth managers are correct that positive growth potentially creates shareholder value, but absent a reliable corporate performance and valuation framework, they too often lack the ability to understand the required future growth and profitability expectations embedded in stock prices. […more]

The Dangers of High Expectations

November 19, 2020

Investors need to understand the expectations that are built into their investments. When large scale events such as the Covid-19 pandemic occur, investors reprice equities based on new information. Expectations can often exceed reality though. […more]

Market in Pictures – October 2020

November 12, 2020

Company Financing A recent chart reminded us of another reason why many investors prefer the US markets. Securitization, while often maligned, forces a mark to market transparency for assets, such as bank loans, that might […more]

Investment Style Twaddle

November 11, 2020

Legendary investor Charlie Munger once said “The whole concept of dividing [indices] up into ‘value’ and ‘growth’ strikes me as twaddle. It’s convenient for a bunch of pension fund consultants to get fees prattling about […more]

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