Tell me what sales per share will be in twelve years’ time along with the profit margin and the price-to-earnings ratio, and I will tell you the price twelve years from now.
It’s just simple arithmetic. Easy, right?
Well, yes, it is actually not as difficult as you might think. Continue reading “Determinants of Return and A Forecast”
It’s been a little while since one of my commentaries because I’ve been very busy preparing (and updating) financial plans for clients old and new.
I have some long-time clients that are coming up on their retirement dates so we’ve been updating the projections accordingly and making necessary adjustments.
Additionally, about five new families have reached out within the last couple months so I’ve been busy preparing their financial plans as well. The financial plans serve as the blueprint for all major financial decisions we make together so it’s a critical, necessary first step in my relationships. It’s been a very busy but fun and very rewarding couple months!
Today, I wanted to provide an update on stock valuations to ensure we’re being mindful of the big picture and not getting too caught up in the short-term noise.
BUT, FIRST, LET US REMEMBER: Investing is a means to an end not an end in and of itself. For most people, investing is a means to an enjoyable, comfortable, stress-free retirement and maintaining their lifestyle throughout retirement. For some others, investing is also a means to gift more money to charity and family. However, for too many people as of late, “investing” has become a hobby, an obsession, a get-rich-quick scheme and/or a source of entertainment. “Investing” has simply become another method of gambling without regard to how various “investment” decisions can impact investors’ most important, long-term financial goals. That gambling mentality is another common feature of bubbles throughout history by the way.
So, let us always remember the true purpose for investing and keep that big picture in mind when making investment decisions. Let us always remember our “why.” Continue reading “YOLO, FOMO and HODL Are Not Investment Strategies…”
A reminder that valuations are NOT short-term timing tools. The purpose of monitoring and understanding stock market valuation data is so we can build more accurate financial projections using more realistic assumptions (and therefore make better financial decisions) and to assist with longer-term investment strategy (i.e. 10-12 year time horizons).
In short, folks who are chasing performance higher at current levels by adding more stocks to their portfolios and/or buying low-quality, money-losing companies at extreme prices are either (1) ignorant to market history, or (2) understand the history but are rationalizing today’s dislocations with “this time is different” or, (3) they simply believe they are smart enough to get out in time.
Let’s take a look at the big picture of U.S. stock market valuations that are more excessive than they’ve ever been in history exceeding even the pre-Great Depression peak at the end of the Roaring Twenties and the Dot-Com Bubble Peak.
Continue reading “U.S. Stock Valuation Update”
It appears a line has been drawn in the sand at $3,900 on the S&P 500 as the widely-watched index has crossed that level several times over the last month (see chart below). Thus far, the S&P 500 has been directionless since the beginning of February.
Over the weekend, I assumed Senate passage of the $2 trillion “relief” bill, and likely passage in the House this week, would have been sufficient to thrust the S&P above 3,900. However, so far, even that has not provided enough fuel to support the next leg higher. Has the market already priced this in? A “buy the rumor, sell the news” dynamic? Continue reading “S&P 500 “Line in the Sand” and Rotation Out of Growth Stocks?”
Today, I want to compare the investment opportunity set in U.S. stocks between 2008 and 2020. I hope this exercise helps illustrate a critical point I’ve been making. Continue reading “Compare and Contrast”