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The Gross Profitability Trap

July 8, 2019

The Gross Profitability Trap “But this time, it’s different!” More foolish words are rarely spoken in the financial industry, but they always seem to find their way back into the stock market lexicon. A firm’s […more]

Valuation Dividend – Quarterly Report Q1 2019

April 24, 2019

The memories are still fresh that the US large cap equity market lost more than 10% of its value in Q4 of 2018, with ~9% alone in December. Barely did investors have a chance to regroup, and the Russell 1000 index rose 8.4% in January and closed 19Q1 14% higher. The Fed that turned dovish was the prime catalyst behind the US equity market rally. On January 4, Fed Chairman Powell indicated inflation was muted and the central bank would be in no hurry to raise rates, leading the R1000 […more]

Common Sense Not Drama

April 10, 2019

With Q1’19 behind us, we were again reminded why most strategies which trade in and out of the market are nothing more than a Siren call luring a portfolio to crash on the rocks of chasing returns. Much better to be Odysseus and put wax plugs into your ears and focus on the long term to avoid buying high and selling low as volatility trashes your sense of normality. After Q4’18, few people had much appetite for equities, thinking only bad news would prevail in the year ahead. Yet, by the end of Q1’19, US equity markets were up double digits. […more]

Intrinsic Value Factor®

February 4, 2019

Valuation Driven™ Investing begins and ends with calculating the intrinsic value of every stock in a benchmark against which a portfolio is constructed, and comparing those values against traded prices. All of Applied Finance’s portfolios are Intrinsic Value Driven™, which differs significantly from a “value” perspective. To gain a better understanding into Applied Finance’s Intrinsic Value Driven™ approach, let’s first review traditional approaches to “Value”.

The traditional approaches to finding undervalued stocks use a simple ratio such as P/E or P/B, or a mix of them. These common approaches to value come with many shortcomings: […more]

Then and Now: Buyers Remorse Versus Sellers Loss

October 31, 2008

Over the past couple months, worsening macro economic conditions, declining corporate profitability and a bottomless stock market have investors longing for the good old days when the economy delivered steady increases in GDP growth with […more]

Value Expectations™ Cisco Systems

August 8, 2000

On Tuesday August 8, Cisco will announce its quarterly results. While Cisco has been a tremendous investment during the 90’s, the question facing portfolio managers today, is, “What am I paying for in today’s price?” […more]

Economic Margin®

July 1, 2000

A corporate performance metric should provide insights into what a firm is worth. Most money managers utilize common earnings-based measures of corporate performance and value, which are suspect and easy to manipulate. Applied Finance developed the Economic Margin (EM) framework to remove the noise inherent in accounting data.

Traditional accounting-based valuation methods provide an incomplete view of a company’s value by not accounting for the investment needed to generate the earnings, cost of capital, inflation or cash flow. […more]

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