Is downside risk the critical driver of
investor asset valuation?
Not exact matches
Stocks remain the best place to invest in 2017 and beyond, as compelling
valuations show the market has further room to run, according to Morgan Stanley Private Wealth Management's Andy Chase, who oversees more than $ 20 billion in
assets for
investors.
Remember, plenty of other experienced
investors are buying in at this
valuation expecting
asset - light Uber to be worth at least $ 100 billion at IPO — and many pundits called Fidelity nuts to invest at a $ 17 billion pre-money just six months ago (similar accusations were hurled at TPG and Google Ventures for giving it a $ 2 billion + mark in the summer of 2013).
More broadly, the regulatory agencies in the United States and the Financial Stability Board internationally have work under way focusing on possible fire - sale risk associated with the growing share of less liquid bonds held in
asset management portfolios on behalf of
investors who may be counting on same - day redemption when
valuations fall.
Sack and Elsasser attribute the low relative
valuation of TIIS over this period to several factors:
investor difficulty adjusting to a new
asset class, divergent supply trends between TIIS and nominal Treasuries, and the lower liquidity of indexed debt.
The two largest funds in the segment — the $ 15 billion iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the $ 9 billion SPDR Bloomberg Barclays High Yield Bond ETF (JNK)-- have faced sizable
asset outflows as
investors fret over high
valuations and rising interest rates.
For example, during 2008 and 2009, many third - party
investors that invest in alternative
assets and have historically invested in our investment funds experienced significant volatility in
valuations of their investment portfolios, including a significant decline in the value of their overall private equity, real
assets, venture capital and hedge fund portfolios, which affected our ability to raise capital from them.
As usual, instead of recognizing the impact of their own speculation in producing the advance, the first impulse of
investors was to try to justify why elevated
asset and housing
valuations made sense.
Equities are essentially 50 - year duration investments at current
valuations, and even if
investors are passive and don't hold any view about future market returns at all, one of the basic principles of financial planning is to align the duration of ones
assets with the expected horizon over which the funds are expected to be spent.
The end of this free - flowing financial bounty, however, could have consequences down the road for
investors too — including regular people who never got to ride the
valuation rocket known as Airbnb to $ 10 billon and beyond, but who still have their personal
assets or retirement plans tethered to big institutional
investors.
As markets — and consequently
asset valuations — rise and fall, global corporates and
investors are on the watch for the next good buy.
Using private market
valuations that were available at the time for Gannett's high quality TV stations and marking to market the company's investments in CareerBuilder and other internet companies, an
investor could have concluded that those
assets alone where worth north of $ 11 a share at the time.
Investors have developed a prejudice about riskiness of
asset classes that ignores
valuation levels.
Investors who buy growth at high starting
valuations generally end up disappointed» Marathon
Asset Management
We see the potential for EM stocks to again outperform in 2018 on rising profitability, higher
valuations and
investors returning to the
asset class.
Because as
investors if you're looking at this current contemporary global macroeconomic backdrop from the 10 - 12 year perspective, I find it with the typical disclosure here that I'm not able to see with a perfect crystal ball or anything but it's hard to believe that traditional
assets, that global equities, will be thriving in this environment just from the simple perspective of how overstretched they are from any reasonable measure of
valuation.
Cash Allocations: I talked about this chart in the video on the Global Risk Radar, specifically I talked about this alongside the chart which showed
valuations as expensive for the major
assets (property, stocks, and bonds), and how it reflects the trend where central banks have bullied
investors out of cash and into other
assets.
As we're now in the ninth year of the current cycle, we think
investors should consider the mixed nature of incoming data such as China's economic stimulus, global liquidity conditions, a US «hard data» letdown and escalating
asset class
valuations.
For more on due diligence, see «RCA
Asset Manager Panel Offers Insights on Hedge Fund Due Diligence» (Apr. 2, 2015); «Operational Due Diligence From the Hedge Fund
Investor Perspective: Deal Breakers, Liquidity,
Valuation, Consultants and On - Site Visits» (Apr. 25, 2014); and «Evolving Operational Due Diligence Trends and Best Practices for Due Diligence on Emerging Hedge Fund Managers» (Apr. 18, 2014).
The question comes up: in a low rate world, with
assets at historically high
valuations, offering historically low returns, what should
investors do?
«Simple
Asset Class ETF Value Strategy» (SACEVS) finds that
investors may be able to exploit relative
valuation of the term risk premium, the credit (default) risk premium and the equity risk premium via exchange - traded funds (ETF).
The past several years have featured little more than a gigantic
asset swap, the short description being that massive volumes of government debt have been swapped by central banks for massive volumes of idle bank reserves, while massive volumes of low - yielding, covenant - lite debt have been issued into the hands of yield - seeking
investors, in order to retire massive volumes of corporate equities at elevated
valuations through buybacks.
When the liquidity premium is high, the
asset is said to be illiquid, and
investors demand additional compensation for the added risk of investing their
assets over a longer period of time since
valuations can fluctuate with market effects.
My guess is that, just as the typical
investor always needs 25 percent of his portfolio to be stable (out of high - volatile
asset classes), he also feels comfortable having 25 percent invested in volatile
asset classes even at times of high risk (high
valuation).
A tactical
asset allocation provides the value
investor a dynamic investment allocation strategy that adjusts to favorable and unfavorable
valuations.
The third type of
investors attempt to control their emotions and increase allocations when
asset valuations are bargains and decrease allocations when
asset valuations are high.
One of the most dangerous things for an
investor to do is to make big changes to his
asset allocation based on
valuations.
Investors of every age should make
valuation the primary determinant of their
asset allocation.
Value
investors need a risk management plan that prevents a permanent loss of capital through the use of
asset allocation, diversification, and
valuation investing.
For the long - term
investor, experiencing gains from high
valuations means experiencing even larger drops in future days than you anticipated when buying into the
asset class.
activist
investors, Amberley Group, blind stock
valuation, Brookwell Ltd, Brulines Group, catalyst, Ennismore, GemPAY, HTEC, Jewel in the Crown, P / S Ratio, Progressive
Asset Mgmnt, Robert Goddard, segment / divisional reporting, Stephen McLeod, Universe Group, Vianet Group
I'm also investigating how long - term conservative
investors may possibly benefit by changing their
asset allocations in response to extreme market
valuation levels, and one paper I recently finished on this topic is «Revisiting the Fisher and Statman Study on Market Timing.»
«But in reality this is rarely the case and the
valuation the
investor receives is reflective of the final net
asset value.
(As a value
investor my problem with a strategic
asset allocation is that it ignores the most important variable:
valuation).
the European periphery is a bubble («The Euro crisis is not over... the European economies are not going to change for the better for years to come despite all the cheating and breaking of laws»), Value
investors need to venture to Russia («when you look at today's opportunity set, you're left with a set of
assets where nothing looks attractive from a
valuation point of view») or buy gold mining stocks -LRB-» The down cycle could be much bigger than anybody believes if the market realizes that all the actions taken in recent years do not work.»)
of total client
assets in the several years leading up to the 2000 market peak, and John Hussman has experienced similar
investor attrition over the last few years as his
valuation models have kept him largely on the sidelines during the market's current bull market run.
But as long as
investors remain relatively uninterested, I see little point in an earnings - based
valuation — let's just tot up
assets instead.
I was as usual making the case that
investors need to pay more attention to
valuations when making
asset allocation decisions.
It may refer to appreciation of company stocks or bonds held by an
investor, an increase in land
valuation, or other upward revaluation of fixed
assets.
the Macro Funds, and ignoring $ 9 billion of «dry powder») for 1.0 % of AUM, ex-net cash & investments — even when you factor in $ 33 billion of Logan Circle fixed income AUM (which
investors may be under - estimating as a potential natural hedge in the current environment), that's an incredibly cheap
valuation for an alternative
asset manager.
My
valuation includes discounts made due to severance package (s), Merger Cancellation Clause, A presumed 2 year lease obligation, and $ 33.2 Million in Cash as well as hard
assets appraised by Value
Investors for Change.
$ 33.2 Million in cash Minus $ 5.74 Million in total liabilities equals A Market Cap of $ 27.46 Million Minus $ 3.7 Million lease termination Divided by 33.11 Million shares Equals A Cash
Valuation of $ 0.72 per share Plus $ 1.12 per share valuation of hard assets that was released last quarter from the research the activist investors put
Valuation of $ 0.72 per share Plus $ 1.12 per share
valuation of hard assets that was released last quarter from the research the activist investors put
valuation of hard
assets that was released last quarter from the research the activist
investors put together.
Our bias for tangible over intangible
assets will almost certainly lead us to a lower
valuation for YHOO than another
investor with a preference for intangible
assets which generate earnings or cash flow.
In a sort of mirror image of the 1999 Dot - Com bubble, when
investors overpaid for high risk, non-yielding stocks, the market today is characterized by eye - popping
valuations for «safe»
assets from bonds of all types to the most conservative sectors of the stock market.
WD - 40 is a good microcosm of how
investors, understandably scared by the way risky
assets got crushed in the wake of both the Dot - Com bubble and the Great Recession, are making the same mistake again, but this time through chasing what they think are safe
assets up to unsustainably high
valuations.
For instance, companies were able to report net pension
assets on their balance sheets even when their pension plans were in serious deficit.This led to situations where analysts and
investors weren't including off - balance sheet liabilities in share - price
valuation.
With
asset valuations at record highs, it's easy for
investors for decide they're going to move to cash, or change their
asset allocations to something more conservative.
An adaptive
asset allocation is best because it can adapt to both the
investor's profile and non-
investor considerations such as
valuations.
We are encouraged that
investors have rediscovered the stock and are sitting tight believing the company is worth more than current
valuation: only 7X earnings per share (EPS), 4.5 X cash flow, and well below our estimate of net
asset value.
In this edition, we feature a Business Insider summary of a recent Baupost letter, a summary of Guy Spier's approach to using checklists, a video of Tom Russo's talk at Google on «Global Value Investing», a ValueWalk article on Pzena
Asset Management, an FT article on Steve Jobs which analyses the start - up conditions at Apple; plus two more videos at the end of this issue — one from Bill Miller on why he thinks now is the perfect time to buy US stocks, the other from London Value
Investor Conference speaker Jean - Marie Eveillard who speaks about market cycles and the risks he sees ahead from «
valuation problems» brought about by quantitative easing.