Posts Categorized: Finance

A History of The Price-to-Sales Ratio

Price-to-sales is a very simple ratio. Arguably, it is the least nuanced and therefore least manipulated valuation measure. A sale, for the most part, is a sale. Unlike earnings, book value, and other fundamental measures which are sometimes more opinion than fact, sales is a more straightforward number. To be fair, there are still issues like aggressive revenue-recognition and…

Is it now smart to be dumb?

Maybe one of the only ways to outsmart a group of really smart people is to hold positions that seem very dumb. The dumbest stocks to hold might be those with the lowest consensus expectations for the future. The best way to find stocks for which the market has very low expectations is to use…

Using the Price-to-Book Ratio

Having explored the history of the price-to-book ratio, we can now turn to its usefulness as a stock selection criterion. The data suggests a few important points about the price-to-book ratio: It has worked quite nicely in small-cap It has not worked as well in large-cap stocks Price-to-book delivers the best returns when it is used…

Lessons From A Weekend With Special Forces

I spent the weekend with a U.S. Army Special Forces team. Their captain—my best friend from childhood—was getting married. Many members of the team were Rangers before graduating to Special Forces and had done several tours in the Middle East. The best man—a captain of another Special Forces team and a Ranger school classmate of…

Why Reading Books Is the Best Thing You Can Do

I was asked a fun question the other day: what is your top advice is for new college graduates? On CNBC, several of us answered the question, and my advice was simple: read as many books as possible. If you want to be interesting, interested, successful, and happy, then there is no substitute for reading….

The Original Value Factor: Price-to-Book

Cheaper stocks have outperformed the market – Everyone As I write and think about “factor investing,” I worry about what Aruther Koestler called the “struggle against the deadening cumulative effect of saturation.” Value investing was revolutionary when Graham was writing about it, and was still fairly revolutionary when Fama/French, Lakonishok, and–shameless plug–Jim O’Shaughnessy (among others) were exploring it…

Should You Use Active Managers?

How much of what you do in your life is the result of what others expect of you? I’ve been trying to remove small talk from my life and replace it with what Larry David calls “medium talk.” If you want to try medium talk, I’d steer clear of the above question. I’ve tried it,…

Knights, Warlord Entrepreneurs, and Innovation

I am invigorated by the amount of innovation that is flowing today, no matter how crazy the associated business valuations may be; there is nothing more exciting than dealing in ideas that may change things for the better—from the individual to the global scale. To keep the momentum and motivation going, we can learn a…

O’Doul’s Part 2

I posted the other day about fundamental indexation being the O’Doul’s of value investing, because it is just the first step away from a market cap weighted index and towards a more differentiated value portfolio. I received lots of emails about the post, so figured I would spend more than 20 minutes on the time series…

Robo-Advisors, Financial Advice, and Millennials

I had a great time today with Jason Zweig and Beth Hamilton-Keen talking all things millennials, robo-advisors, and investor behavior. We talk alot about the importance of using automation and technology to our advantage, so its fun that the set is completely virtual. Check out the video below: