This is why
the relative valuations of these stocks tend to fall as rates rise.
I understand his valuation arguments, but he needs to get more sophisticated, and look at
relative valuations of stocks to bonds.
How to do
the relative valuation of stocks?
Again, because we are attempting to learn to predict the relative performance of a stock, it also seems reasonable to provide the model with
the relative valuation of the stock as input.
Relative valuation of stocks is a good alternative to the absolute valuation.
Not exact matches
One popular
valuation metric, the Equity Risk Premium (ERP), can be useful in assessing both
relative returns and the right mix
of stocks versus bonds.
When all other things are equal,
valuation ratios are a good way to quickly compare the
relative value
of a
stock against others, as well as to look at the
relative value
of a
stock over time.
So, when you are looking at
relative valuations, always compare like - for - like and look at
valuations of stocks that operate in the same economic sector.
Her latest analysis
of the various sectors — which takes into account each group's business cycle, fundamentals,
relative valuations and
relative strength — puts technology and consumer discretionary
stocks on top.
On the
valuation side SBGL currently has a PE
of 7.64 making this
stock cheap
relative to the market in general.
In general, they may seek to take advantage
of market inefficiencies such as pricing differences and
relative discrepancies between securities such as
stocks and bonds, technical market movements, deep fundamental
valuation analysis, and other quantifiable trends and / or inconsistencies.
3) The Hussman Strategic Growth Fund has gradually shifted from smaller to larger capitalization holdings in recent years, not out
of any necessity due to Fund size (at the Fund's current asset level, we could easily populate the Fund with mid-caps if it was optimal to do so), but precisely because large
stocks generally carry the best
relative valuations.
Given the absence
of a public trading market
of our common
stock, and in accordance with the American Institute
of Certified Public Accountants Accounting and
Valuation Guide,
Valuation of Privately - Held Company Equity Securities Issued as Compensation, our board
of directors exercised reasonable judgment and considered numerous and subjective factors to determine the best estimate
of fair value
of our common
stock, including independent third - party
valuations of our common
stock; the prices at which we sold shares
of our convertible preferred
stock to outside investors in arms - length transactions; the rights, preferences, and privileges
of our convertible preferred
stock relative to those
of our common
stock; our operating results, financial position, and capital resources; current business conditions and projections; the lack
of marketability
of our common
stock; the hiring
of key personnel and the experience
of our management; the introduction
of new products; our stage
of development and material risks related to our business; the fact that the option grants involve illiquid securities in a private company; the likelihood
of achieving a liquidity event, such as an initial public offering or a sale
of our company given the prevailing market conditions and the nature and history
of our business; industry trends and competitive environment; trends in consumer spending, including consumer confidence; and overall economic indicators, including gross domestic product, employment, inflation and interest rates, and the general economic outlook.
Even without suggesting that money will move «out
of cash and into
stocks,» one might argue that
relative valuations are too wide, and that
stocks should be priced to achieve lower long - term returns, given the poor returns available on bonds.
While the current premium on U.S.
stocks makes some sense in the context
of low inflation and low rates,
valuations look stretched
relative to
stocks in the rest
of the world.
The attractive
valuation of stocks relative to bonds became a widely held belief after Edgar Lawrence Smith published a book in 1924 on stock market valuation, Common Stocks as Long Term Invest
stocks relative to bonds became a widely held belief after Edgar Lawrence Smith published a book in 1924 on
stock market
valuation, Common
Stocks as Long Term Invest
Stocks as Long Term Investments.
While there are a number
of factors for investors to stay mindful
of — including relatively lofty US
valuations (the S&P 500 price - to - earnings ratio suggests
stocks may be expensive
relative to historical values), geopolitical tensions around the globe (including the Korean peninsula), and legislative uncertainty (such as the final details and implementation
of tax reform legislation)-- healthy corporate earnings have underpinned the market's rally to record highs.
In my view, investors who view current
valuations as «justified
relative to interest rates» are really saying that a decade
of zero total returns on
stocks is perfectly adequate compensation for the risk
of a 45 - 55 % market loss over the completion
of the current market cycle - a decline that would historically be merely run -
of - the - mill given current
valuations, and that certainly can not be precluded by appealing to low interest rates.
I have no opinion on whether there is a bubble in gold shares at the moment; having one would require a knowledge
of these
stocks» fundamental
valuations relative to their market prices.
UK
stocks (as measured by the FTSE 100 Index) offer the highest dividend yield
of any major region (as measured by the MSCI World Index).1 UK
valuations are the cheapest
relative to the rest
of the world in 15 years.2 What's more, FTSE 100 Index companies with more than 70 %
of their revenues from abroad stand to benefit from the weaker pound.
Estimating future surplus starts with current metrics like earnings or cash flow, so using the most recent financial information against the market
valuation is a good indicator
of the
relative cheapness
of a
stock.
But I would say my concept
of value has changed to a more
relative sense
of valuation, based on the expected growth rate applied against the price
of the
stock.
One
of the great anomalies
of investing: The historical long - term outperformance
of certain smart beta or factor - based strategies
relative to the broader equity market (think choosing
stocks based on their
valuations, momentum, low volatility or quality metrics such as profitability).
Knowing how
stocks are priced historically
relative to some metric like earnings or cash flows is far more instructive than knowing whether
stocks are at an all time high or not (we've addressed the predictive utility
of stock valuations in several posts, including here and here).
*
Valuations of dividend paying
stocks look reasonable
relative to the rest
of the
stock market.
A
valuation metric for determining the
relative trade - off between the price
of a
stock, earnings generated per share (EPS), dividend yield and the company's expected growth.
Price - earnings ratios can give you a sense
of whether the
stock market is pricey
relative to historical
valuations.
In contrast, the aggregate measure indicates that profitability is trading very near its historical norms
of relative valuation, perhaps explained by low P / B value
stocks having far less profitability than they have historically.
First, note how high Colgate's
stock price was
relative to True Worth ™
valuation at the beginning
of calendar year 2000 which caused it to go sideways, not withstanding short bouts
of volatility.
When
relative valuation is gauged using the aggregate measure (reported in the right-most column
of Tables 1 and 2 for both aggregate and P / B
valuations), we find that the cheapest
stocks based on B / P are no longer cheap.
Seeks to capture large cap
stock mispricing opportunities due to market inefficiency, by continuously computing
relative valuation of large cap
stocks according to growth factors such as earnings growth rate, sales growth rate, p / e / g ratios, asset turnover rate, operating margin, debt / equity ratio, free cash flow,
relative price strength, etc..
Ex-Fed Chairman Greenspan's favorite way
of measuring
relative valuation between
Stocks and Bond is the Earnings - Yield to Bond - Yield ratio.
In the process
of scanning the investment landscape to find value amidst the all time highs for the indices, I've noticed that a number
of big cap tech
stocks are priced at low
valuations relative to their earnings and free cash flow, measured on an absolute basis and
relative to their own historical
valuations.
In this part 2, I will present the final 10
of 20 attractively - valued dividend growth
stocks that I felt were currently worthy
of consideration based on attractive or fair
valuation relative to the overall market.
In a series
of articles we published in 2016,1 we show that
relative valuations predict subsequent returns for both factors and smart beta strategies in exactly the same way price matters in
stock selection and asset allocation.
It uses price in relation to earnings and book value to identify the
relative valuations of stable dividend
stocks.
As with asset allocation and
stock selection,
relative valuations can predict the long - term future returns
of strategies and factors — not precisely, nor with any meaningful short - term timing efficacy, but well enough to add material value.
The chart compares the
valuations of commodities
relative to
stocks.
Valuation Chart at Left: Compares the Hartford Funds Value Factor Score, a composite measure of relative valuation based on five measures of value, of the stocks that comprise RODM with the stocks within the MSCI World ex U
Valuation Chart at Left: Compares the Hartford Funds Value Factor Score, a composite measure
of relative valuation based on five measures of value, of the stocks that comprise RODM with the stocks within the MSCI World ex U
valuation based on five measures
of value,
of the
stocks that comprise RODM with the
stocks within the MSCI World ex USA Index.
There are a number
of financial ratios that you can use to do the
relative valuation of the Indian
stocks.
There are many ways
of evaluating expected future returns and determining price
relative to value, as we discussed in «Selecting a
Valuation Method to Determine a
Stock's Worth» (April 2014 AAII Journal).
So you have
stocks that are selling at very low P / E ratios, very low P / B ratios (and low
relative to their own historical
valuations in both those categories), AND they are growing their book values (most
of them at least).
If you find you're applying such
valuation haircuts, I suspect you'll quickly lose track
of proper
relative values across your
stock selection process.
This continues until the gravitational effects
of relative valuations gets too great — the cash flows
of the hot
stocks do not justify the
valuations.
I always have plenty
of ideas to consider, I'll inevitably review & collate a company's figures myself if I'm interested, but identifying a
stock's peer group and
relative valuation can be a god - awful challenge.
Down markets have a way
of changing
relative valuations between
stocks, industries and geographies.
I have no opinion on whether there is a bubble in gold shares at the moment; having one would require a knowledge
of these
stocks» fundamental
valuations relative to their market prices.
While return dispersion is low, dispersion
of valuations remains relatively wide by historical standards... Furthermore, there has been a strong relationship between
valuation spreads and subsequent outperformance
of value
stocks (
relative to glamour
stocks).
-- Regardless
of my thoughts on
valuation, it was perhaps inevitable the absolute &
relative performance
of the TGISVP Portfolios would be dominated each year by resource
stocks.
The alternative,
of course, is to sit down & re-survey the listed German property sector, in the hopes
of finding another KWG... i.e. a still relatively undiscovered
stock / company that offers an attractive
relative / absolute
valuation and / or prospective NAV growth!?