Tag Archives: valuation

TAA vs buy and hold in overvalued markets (CAPE > 30 edition)

Personal note: Sorry for the long delay from posting. I had a death in the family this summer, a big overseas family wedding, and I’ve been working on getting my newsletter released, which I’ll announce in a later post. Now, I’m back. I was thinking this morning that with the increasing talk of market valuation, bubbles, etc. it would be a good time to revisit my post on TAA vs buy and hold in overvalued markets from 5 months ago. Read that post for a background on the analysis I did below. Since we’re at a new level in CAPE … Continue reading

Posted in TAA Investing | Tagged , , , , | 15 Comments

Juicing up small cap value quant portfolios

The world of quantitative finance is never boring. At least not from the research perspective. Today I want to explore some new research from one of the top quant shops on the small company effect and see how an investor can apply it simply to an existing quant approach. Specifically, I want to investigate if adding a quality screen to a small cap quant value portfolio increases performance. AQR is one of the top quant shops in the business. They do some great quant research. Their latest paper, besides having one of the best titles I’ve seen for a finance … Continue reading

Posted in Quant Investing | Tagged , , , , , | 4 Comments

Future returns and their impact on SWRs

Today I wanted to talk about the forecasting of future returns and more importantly what implications future returns have for SWRs (Safe Withdrawal Rates). As I showed in my last post, the first 10 year period real return in retirement is the best predictor of SWRs for 30 year retirement periods. Thus by creating a model for returns for the next 10 years based on where assets are priced today we can get a better idea as to the applicability of the traditional 4% SWR for future retirees. There’s a been lot of discussion over the last couple of years in the financial blogosphere … Continue reading

Posted in Retirement | Tagged , , | 4 Comments

MLP Jan 2013 results – second best ever

Just wanted to update the January effect results for the MLP sector. As I noted in previous posts January tends to be the best performing month for the MLP sector. January 2013 ended up being the 2nd best January for MLPs ever, with a total return of 12.6% Here is an updated chart as of Friday’s close.   Hopefully, you participated in at least some of that move. Now, the important point – history says that strong a strong January leads to strong full year results. And the stronger the January the higher the full year results. This should not … Continue reading

Posted in Stocks | Tagged , , | 2 Comments

Aflac (AFL): the duck’s got game

Aflac (AFL) is currently one of my favorite undervalued dividend stocks. I’ve mentioned it briefly in two prior posts (here and here). The company’s core business is strong and has great growth prospects. The current market environment has it quite undervalued and thus presents a great opportunity for patient long term investors. In this post I’ll describe why I think AFL is such a good investment. AFL is an insurance company at its core. It provides a unique type of insurance, supplemental health insurance, which gives it a heads up on competition. The first thing that matters for an insurance … Continue reading

Posted in Stocks | Tagged , , , | 6 Comments

Finding true value and avoiding value traps

Value investing seems easy when you first approach it. Buy stocks that are undervalued and wait until they return to at least fair value. Finding those stocks that are cheap is also pretty easy. Pick your favorite ratio, arm yourself with a stock screener, and you can easily find a long list of ‘undervalued’ stocks. Well, at least cheap stocks. And therein lies the challenge. Most stocks are cheap for very good reasons. These are known as value traps. The art of successful value investing then lies in being able to identify stocks that represent true value as opposed to … Continue reading

Posted in Stocks | Tagged , , , , , | 1 Comment

MLP valuation – cheap yet again

For my first post back from my break, I’d like to focus on the valuation of one of my favorite sectors, MLPs. I’ve posted on MLPs many times before (see here for a list of posts) and my largest single stock position for years has been Enterprise Products (EPD). Bottom line, MLPs are cheap yet again and present a nice entry point for long term investors. The best way to judge the valuation of MLPs, and almost all income based investments, is to look at spreads to US treasuries, in this case the difference in yield between the MLP index, … Continue reading

Posted in Stocks | Tagged , | 5 Comments

MLP valuation for January 2012

It’s a good time to update the valuation for one of my favorite sectors for income investors and retirees, MLPs. MLPs had another great year in 2011, especially during Q4. The sector returned 14% for the year vs 2% for the SP500. I’ll spare everyone the suspense buildup of the next 600 words or so and say that I think that the sector is slightly overvalued on a short term basis but many individual MLP names are offering good value. On a longer term view the sector is still very compelling. As I write this on Jan 13, 2012 there … Continue reading

Posted in Stocks | Tagged , , , , , | 13 Comments

2012 investment outlook

I don’t know why I feel the need to do an outlook post. I don’t pay any attention to market forecasts. I don’t invest in indexes. So, why the need for an outlook post? Well, over the years I have to come to the opinion that it is quite helpful to your investment results to know at a very broad level if you’re investing with a head wind or with a tail wind. For me this affects my broad allocation to cash versus risk investments and also helps me determine how much risk to take in my trading account. The … Continue reading

Posted in Economy | Tagged , , , , , | 1 Comment

Don’t let anchoring tie you down

Today I wanted to touch on another common behavioral issue that most investors fall prey to, anchoring. I’ve commented previously on the behavior gap, how behavioral issues lead to investor under performance and specifically how more information often leads to worse investment performance. Anchoring is another behavioral pitfall for investors. I’ll describe what it is first and then show a common way it affects income investors. Anchoring describes the effect of irrelevant numbers in people’s behavior. It turns out that irrelevant numbers impact our decision making in dramatic ways. James Montier in this piece on behavioral issues uses the following … Continue reading

Posted in Dividends, Stocks | Tagged , , , , | 2 Comments