Here, I'm going to walk you through how to calculate the Sharpe
Ratio of a single stock and how to interpret it.
Not exact matches
I'm actively looking at my debt and determining if it makes more sense to pay down mortgages (locking in a guaranteed ~ 4 % return) or investing in bonds (~ 1 % returns if held to maturity) or
stocks (uncertain, but I just wrote an article about the current PE
ratio and the inevitable reversion to the mean and I believe we are likely headed for 10 years
of low
single digit returns).
At Berkshire Hathaway's recent annual shareholders meeting, an investor asked Buffett about the relevance
of two popular measures
of stock market value: 1) market cap - to - GDP, which Buffett once heralded as «probably the best
single measure
of where valuations stand at any given moment» and 2) the cyclically - adjusted price - earnings
ratio (CAPE), which was made famous by Nobel prize winner Robert Shiller and was seen as accurately predicting the dot - com bubble and the housing bubble.
After T - Mobile and Sprint said they have ceased discussions to merge into a
single entity back in November, both the company today announced a they have entered into a definitive agreement to merge in an all -
stock transaction at a fixed exchange
ratio of 0.10256 T - Mobile shares for each Sprint share or the equivalent
of 9.75 Sprint shares for each T - Mobile US share.
Selecting low
single - year price - to - earnings
ratios works with the Large
Stocks, but not with the universe
of All
Stocks.
Tobias Carlisle, in Deep Value (affiliate link) provides evidence that this may be the best Return On Total Assets
Ratio to
single out
stocks that can provide above average rates
of return.
For example, for an ADR that has a conversion
ratio of 10 - to - 1, a
single ADR share represents 10 shares
of the underlying foreign
stock.
Almost all
of the
stocks I looked at in Value line are
single digit current P / E
ratios as well.