Posts Categorized: Finance

Talk Is Cheap: Why CEOs’ Actions Speak Louder Than Their Words

When you think of any famous CEO, you probably think of the great products or services that they’ve championed. CEOs that build great businesses become very famous, and justifiably so. But building a business that generates tons of cash flow is just step one. The less interesting—but equally crucial—job of any CEO is allocating their…

Portfolio Patriotism, and Why You Should Avoid It

The U.S. equity market is expensive.  The median stock is about as pricey as it’s been in 50 years, and valuations are all clustered: there are far fewer bargains than in years past. I am not an index investor, so I generally pay less attention to market-level valuation measures like the Shiller P/E or Tobin’s…

Reading List – May 2014

I’ve started a monthly reading list to share the best books that I’ve ever read. For the first few months I will also post the lists here to give you a sense for what they look like. If you’d like to receive these monthly recommendations, sign up for the reading list here. Also, if you have any…

Beware Experts Bearing Predictions

You should ignore experts making predictions, you should avoid making predictions of your own, and you should definitely avoid any investment decision that is predicated on a subjective prediction. Predictions are everywhere in investing (price targets, GDP forecasts, S&P 500 earnings, EPS estimates, and so on), but they are usually worthless.   Our brains evolved…

The Death of Money Portfolio

I finished James Rickards’s latest book Death of Money this weekend, which I found provocative, informative, and scary, but ultimately lacking in terms of investment advice.  Rickards knows his stuff, and I recommend the book for all the great information it contains and because it will get you thinking. I plead ignorance on most of…

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…