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Challenging the Status Quo

Applied Finance has never shied away from challenging the status quo in the pursuit of making meaningful contributions to the investment community.

Our roots were and remain dedicated to answering two questions critical to any investment decision:

  • What is a firm’s economic performance?
  • What is a firm worth?

This quest has led to the creation of many forward-thinking innovations, including capitalizing operating leases and R&D expense, modeling competition through Economic Profit Horizon™, and Quantitative Valuation™ to bridge the gap between fundamental and systematic analysis, to name a few.

While we might not be able to change the status quo in our industry, we can certainly provide you with insights and opportunities to make better investment decisions.

For example, we believe The ‘Evidence’ In ‘Evidence-Based Investing’ Is Very Hard to Find and having a one-dimensional view of the False Choice of Value and Growth Investing puts you at a major disadvantage. We discuss this paradigm shift in our working paper, Valuation Beta. If you enjoy listening to podcasts, I recommend listening to The Intelligent Investing Podcast #129 with Rafael Resendes for a fun introduction to this study.

As stewards of capital, this has been another eventful year. Thinking back to all the ups and downs we have all gone through; I can’t help but to keep this quote in mind:

“This year, like any, is a great year if but only we know what to do with it.” – Ralph Waldo Emerson.

Remember, Emotional Unease Creates Generational Wealth Opportunity. While we rarely make big calls, valuation levels in March were too attractive to ignore. Since then, the S&P 500 has roared back over 50%.

Closing out the year we wanted to share our most read posts of 2020 and invite you all to attend our upcoming Webinar, Valuation Beta: A New Asset Pricing Paradigm on January 14, 2021 @ 3:00 PM CST.

December 2020

The ‘Evidence’ In ‘Evidence-Based Investing’ Is Very Hard to Find
“There is an insatiable demand for objective, easy to calculate metrics which are applicable across firms and outperform the market. In other words, everyone is looking for a unicorn.” – Rafael Resendes

The Intelligent Investing Podcast #129 with Rafael Resendes
Our Co-founder, Rafe Resendes, discusses the firm’s research history, our Valuation Driven® investing approach, our Economic Margin & how intrinsic value has been misunderstood in the #value community with Eric Schleien on Intelligent Investing Podcast.

Demystifying the False Choice of Value and Growth Investing
Instead of choosing sides, since 1995, Applied Finance has advocated for a robust valuation-centric philosophy emphasizing economic principles centered around profitability, growth, competition, and risk.

The Dangers of High Expectations
Investors should remember that they are paying for future results, and someday, those results need to materialize. Promising stories and large top-line growth can drive stock prices in the short term, but cash flows in the long term are king.

Market in Pictures – Issue #4
This month’s edition of Market in Pictures highlights how it’s going for the Value Factor, the recent rotation to small-cap stocks, searching for value in today’s market, and the big bounce in sectors that were hit hardest earlier this year.

The Roaring 2020’s
During the global pandemic and subsequent government responses, investor appetite for risk has increased dramatically. The IPO market in 2020 has been especially frothy. Despite aggressive valuations, investors have bid up many listings on the first day, sometimes over 100%. Be careful what you pay for and remember: The only thing more powerful than profits are dreams of profits.

Most Read articles of 2020

  1. Emotional Unease Creates Generational Wealth Opportunity
  2. Demystifying the False Choice of Value and Growth Investing
  3. The False Bargain of Passive Investing
  4. Coronavirus Disease 2019 (COVID-19) Outbreak and Investing
  5. Investment Style Twaddle
  6. Tracking Valuation Hazards: How risky are markets today?
  7. Time to Reconsider Large-Cap Value/Growth Allocations
  8. Small-Cap Growth Most Expensive Valuation Since Tech Bubble
  9. Analyst Insights – Consumer Stocks Dying and Thriving During the age of Covid19
  10. Analyst Insights – Dhaval Sanghavi CFA, CPA gives his thoughts on Tech Sector

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