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Archive for the ‘About’ Category

Volatility at World’s End: Two Decades of Movement in Markets

Posted in Austrian Economics, Stocks, tagged , on May 11, 2012 | Leave a Comment »

Chris Cole of Artemis Capital Management has created an incredibly cool film called “Volatility at World’s End: Two Decades of Movement in Markets” showing  a depiction of real stock market volatility using trading data from 1990 to 2011. It accompanied his speech at the 2012 Global Derivatives and Risk Management Conference in Barcelona, Spain. Here’s Chris’s [...]

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James Montier on why investors struggle to follow the Magic Formula: Cognitive Biases and Behavioral Errors

Posted in About, Behavioral economics, Enterprise Multiple, Enterprise Value, Stocks, Strategy, tagged , , , on May 8, 2012 | Leave a Comment »

In his 2006 paper, “The Little Note That Beats the Markets” James Montier backtested the Magic Formula and found that it supported the claim in the “Little Book That Beats The Market” that the Magic Formula does in fact beat the market: The results certainly support the notions put forward in the Little Book. In all [...]

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How to beat The Little Book That Beats The Market: An analysis of the Magic Formula

Posted in About, Behavioral economics, Enterprise Multiple, Stocks, Strategy, Warren Buffett, tagged , , , , , , , on May 7, 2012 | 9 Comments »

Since Joel Greenblatt’s introduction of the Magic Formula in the 2006 book “The Little Book That Beats The Market,” researchers have conducted a number of studies on the strategy and found it to be a market beater, both domestically and abroad. Greenblatt claims returns in the order of 30.8 percent per year against a market [...]

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Recent net net performance: Parsing on F_SCORE and Size

Posted in Net Current Asset Value, Stocks, tagged , on May 4, 2012 | Leave a Comment »

Wes Gray’s Turnkey Analyst has a guest post from Paul Sepulveda in which Paul  asks if it’s possible to improve net net returns by removing stocks with the highest risk of going to zero (the real losers). Paul has an interesting approach: My goal was to chop off the left tail of the distribution of returns. Piotroski [...]

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Should the business cycle affect the choice of price ratio? Asset-based measures versus earnings and cash flow-based measures

Posted in About, Enterprise Multiple, Strategy, Value Investment, tagged , , , on May 3, 2012 | 1 Comment »

In their March 2012 paper, “Analyzing Valuation Measures: A Performance Horse-Race over the past 40 Years,” Wes Gray and Jack Vogel asked whether the business cycle should affect our choice of price ratio: For example, cash-focused measures, such as free-cash-flow, might perform better during economic downturns than accounting-focused measures like earnings. Or perhaps a more asset-based [...]

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Do long-term, normalized price ratios outperform single-year price ratios?

Posted in About, Enterprise Multiple, Stocks, Strategy, Value Investment, tagged , , , , on May 2, 2012 | 8 Comments »

In their March 2012 paper, “Analyzing Valuation Measures: A Performance Horse-Race over the past 40 Years,” Wes Gray and Jack Vogel asked, “Do long-term, normalized price ratios outperform single-year price ratios?“ Benjamin Graham promoted the use of long-term, “normalized” price ratios over single-year price ratios. Graham suggested in Security Analysis that “[earnings in P/E] should cover a [...]

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Which price ratio outperforms the enterprise multiple?

Posted in About, Enterprise Multiple, Stocks, Strategy, Value Investment, tagged , , , on May 1, 2012 | 12 Comments »

Friends, Romans, countrymen, lend me your ears; I come to bury Caesar, not to praise him. Having just anointed the enterprise multiple as king yesterday, I’m prepared to bury it in a shallow grave today if I can get a little more performance. Fickle. In their very recent paper, “Analyzing Valuation Measures: A Performance Horse-Race over the past [...]

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Active versus passive value investing: Does spending time researching a company’s fundamentals generate higher returns?

Posted in About, Stocks, Strategy, Value Investment, tagged , on April 27, 2012 | 10 Comments »

Aswath Damodaran, in his excellent paper “Value Investing: Investing for Grown Ups?”, asks whether spending time researching a company’s fundamentals (“active” investing) generates a higher return for investors than a comparable value-based index (“passive” investing)? Says Damodaran: Of all of the investment philosophies, value investing comes with the most impressive research backing from both academica and practitioners. [...]

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Value investing works, so why do value investors underperform? The evidence for activist value investors

Posted in Activist Investors, Stocks, Value Investment, tagged , , , on April 26, 2012 | 4 Comments »

This week I’ve been taking a look at Aswath Damodaran’s paper ”Value Investing: Investing for Grown Ups?” in which he asks, “If value investing works, why do value investors underperform?” Damodaran divides the value world into three groups: “The Passive Screeners,” – “The Graham approach to value investing is a screening approach, where investors adhere to strict screens… [...]

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Value investing works, so why do value investors underperform? The evidence for contrarian value investors

Posted in Contrarian investment, Stocks, Strategy, tagged , , on April 25, 2012 | 8 Comments »

Yesterday, I examined Aswath Damodaran’s paper ”Value Investing: Investing for Grown Ups?” in which Damodaran asked, “If value investing works, why do value investors underperform?” Damodaran divides the value world into three groups: “The Passive Screeners,” – “The Graham approach to value investing is a screening approach, where investors adhere to strict screens… and pick stocks that pass those [...]

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