Posts Categorized: Finance

Popular Stocks Stink

Why does value investing work?  One of the reasons is that value factors like price-to-cash flow or price-to-earnings identify companies with very low market expectations. They tend to be boring companies, have negative news, poor outlooks, and so on. Value works because the market leaves these stocks too cheap, and when perception is ultimately adjusted…

The Five Year Market Metamorphosis

The U.S. market has gotten much more expensive in the past five years following the incredible buying opportunity in 2009.  One great valuation measure is EBITDA (earnings before interest, depreciation, and amortization) divided by Enterprise Value (sometimes called ‘takeover value’, calculated as market value of a company, plus debt, minus cash). I’ll shorten the name…

The Remarkable Transformation of $AAPL

People too often mistake great companies for great stocks. It seems like the two things should be related: great companies should be great investments. But this is often a dangerously misleading notion.  If the market thinks a company is great, its prices that company’s stock accordingly, which can lead to expensive prices and weak returns….

1,000% Returns – Hitting the Stock Market Lottery

Hope springs eternal in the human breast. – Alexander Pope People love huge, lottery like gains. Fast gains get attention, which is why I titled this post “1,000% Returns” instead of “Earn 1,000% Over 30 years.” In pursuit of quick riches, we sometimes turn to lottery-like stocks: companies that trade at outrageous valuations, have exciting…

Reading List – April 2014

Every month, I am going to suggest 3-5 of the best books that I’ve ever read. To get the suggestions each month, sign up here. Here are the suggestions for April, 2014: Inside the Investor’s Brain: The Power of Mind Over Money (Wiley Trading) by Richard L. Peterson This is, by far, the best collection…

Warren Buffett and the Banana Man

Had a Chiquita banana lately? I was amazed to learn the remarkable story behind the brand, which began in 1911 with a company called Cuyamel Fruit Company and a Russian immigrant named Sam Zemurray. Sam (aka “Sam the banana man”) was a remarkable businessman who personified the American dream, but also exposed some of the…

“Sell in May” and Election Cycle Years

As May approaches, I figured it’d be a good time to summarize the historical evidence for/against “selling in may and going away” and the evidence for investing more or less during certain years of the election cycle.  Here is a quick summary, using S&P 500 return data from 1926-2014. Stocks have performed better in the…

Millennials Are Screwing Up Their Investments

Young people are going about investing all wrong. The most basic (and important) decision you make as an investor is your allocation between major asset classes—primarily stocks, bonds, and cash.  Here is how millennials’ portfolios look in 2014, according to a recent research report from UBS. This allocation screams caution, worry, and distrust of the stock…

Lao Tsu Can Make You A Better Investor

Pearls of investing wisdom from unrelated sources. Care about what other people think and you will always be their prisoner. – Lao Tsu The market is just a bunch of other people.  Collectively, they get too excited or too scared about investments all the time, leaving certain stocks/assets way too expensive or way too cheap….