Intrinsic Value

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]

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]

Valuation Edge® Analyst Interview Series Jun Wang, CFA Senior Fundamental Analyst, Partner, Applied Finance B.A. Southwest University China, MBA California State University, Fresno Valuation Edge: Hello Jun, thank you for taking the time to share […more]

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]

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]

A quick look at some of the huge moves in the market yesterday on news that a viable vaccine for Covid-19 is on the horizon. Small cap value was up during the 2000 bubble pop […more]

In October 1995, Dan Obrycki and I started Applied Finance. As we struggled to solve several valuation problems back then, we did not know that we would ultimately create and manage the Valuation 50, one […more]