Sentences with phrase «about reversion to the mean»
Yeah I remember watching a video of Greenblatt where this topic came up in the class... one time Greenblatt was actually asked this very question: What about the reversion to the mean in returns on capital (i.e. are you concerned about high ROC companies seeing their returns deteriorate).
http://basehitinvesting.com/ 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).
I give Grantham credit for coming to this realization (something he has done before) but I wonder how his investors feel about it after years of playing the mean reversion waiting game.
It is a book about why long - term investing serves you far better than short - term speculation; about the value of diversification; about the powerful role of investment costs; about the perils of relying a fund's past performance and ignoring the principle of reversion (or regression) to the mean (RTM) in investing; and about how financial markets work.
With charts like this, looking at relative valuation, you can expect some «mean reversion» over time and you have to make a judgement about what you think is an appropriate level of premium / discount, and in turn, what you think is an attractive level.
I've posted here regularly about the implications of mean reversion in elevated profit margins (see, for example, The Temptation To Abandon Proven Models In Speculative and Fearful Markets: Why This Time Isn't Different, What Record Corporate Profit Margins Imply For Future Profitability and The Stock Market, Warren Buffett, Jeremy Grantham, and John Hussman on Profit, GDP and Competition).
At the simplest level, Hussman's arguments are about mean reversion of earnings yields, something that even diehard bulls like Siegel admit to.