Posts Categorized: Finance

A (Very) Short History of Shareholder YIeld

I’m working on a longer piece on share repurchases (and shareholder yield) and found the two charts below very interesting.  Buybacks are an important part of the corporate toolkit here in the U.S.–since the late 1990’s, cash spent on gross buybacks has exceeded cash spent on dividend payments. This first chart shows the total dollar…

The Best Investing Books Ever

I’ve only been posting here for a few months, but already I’ve learned that the most valuable part of writing online is meeting smart, interesting people and learning from them. I learn mostly through books, so I’ve asked a bunch of my favorite writers what their all-time favorite investing books are. I love the list…

Margins Don’t Matter When Picking Stocks

With all the talk of high profit margins, it is worth remembering that they are nearly useless as a tool for individual stock selection. If you are an index investor, then margins (and maybe more accurately, ROEs) matter a great deal because when margins/ROEs revert to longer term norms, the market will likely suffer. But…

The Market’s Return on Equity

“Jesse Livermore” has a thorough and convincing new article in which he argues that return on equity (ROE) matters more than profit margins, because it is high ROEs—not high profit margins—that lure new entrants into a market and drive competition.  As Livermore says, “Corporations seek to maximize their total profits…The mistake we’re making here is…

Gold vs. The Stock Market

I’ve never been able to figure out gold as an investment. It has a rich history as both a precious metal and means of monetary exchange, and more than forty years after the end of the gold standard, gold still gets an inordinate amount of attention.  I’ve read lots about gold, but even after countless…

Following Trends Across and Within Industries

Last week, I posted about two ways to improve a momentum strategy by using value and quality to screen out dangerous momentum stocks. It so happens that lots of the momentum high-fliers from 2013 were concentrated in several key industries, like social media and biotechnology. This concentration begs the question, how much of the momentum…

Skin in the Game

They say you should put your money where your mouth is. With that in mind, I really liked the spirit of Meb Faber’s recent post about having “skin in the game,” and so here I copy his idea (and hope others follow suit). To reiterate something Meb said, my situation is unique and my investment…

More Expensive Than Ever?! (No)

Profit margins are high, so I’ve seen many bears resort to using price-to-sales as their go-to barometer of market valuation. My data-torturing heckles are up a bit (as is, if you torture the data long enough it will tell you anything you want to hear).  Price-to-earnings doesn’t tell a catastrophic story, nor does market level…

“Do What You Love”

My wife and I had a scare with our four month old son yesterday. Following a routine checkup, we had to see an especially dreaded kind of “specialist” about something.  Everything turned out fine and normal, but it was our first experience as parents feeling abject terror—a feeling of deep, gut-wrenching love and emotion. It’s…

For Great Returns, Follow the Cash

Earnings get all the attention on Wall Street. While earnings are of course important (and measures like P/E are very useful in stock selection), they aren’t everything.  Less discussed, but equally important, is the cash that is flowing into and out of a company. Hidden in the statement of cash flows is an extremely useful…