Value Investing Mean Reversion and Intrinsic Value |
- Mean Reversion and Intrinsic Value
- Interest rate adjusted Buffett Indicator
- The Dark Money Secretly Bankrolling Activist Short-Sellers
- When will the current euphoria burst the bubble?
| Mean Reversion and Intrinsic Value Posted: 31 Dec 2020 03:49 PM PST Hi guys, I'm sure as many of you know from reading Ben Graham's material that he mentions in Security Analysis that value investing is based on two principals in particular that:
When asked about the tendency for market price to catch up with Value in 1955 Graham responded that "it is one of the mysteries of our business and it is a mystery to me as well as to everyone else" Now these principles have been echoed by many value investors today such as Warren Buffett, Seth Klarman and Joel Greenblatt for example who teaches a class at Columbia university and said he promises his students that if they do good analysis the market will agree with their valuation However after coming across multiple studies that have been done on the subject with companies in various industries across multiple markets that state that mean reversion is false and that what Graham has said is no longer correct I'm curious to get your guys opinion on it and would be interested if any of you have tested it with a large sample yourselves? [link] [comments]  |
| Interest rate adjusted Buffett Indicator Posted: 31 Dec 2020 06:09 AM PST Buffett indicator is calculated in the following way: Total GDP/Total stock market cap. It has famously been described by Warren Buffett as the single best way to measure whether the stock markets are overvalued. If we only look at this measure then it clearly shows that the stock market is over 2 standard deviations above the historical average, therefore is overvalued. However, this indicator does not take into account the interest rate and the amount of money in circulation. To account for this, my idea is to calculate the Buffett indicator as described above and multiply it with the historical interest rates and divide it with the historical levels of money supply in each period. This would result in an index that shows whether equities are over- or under the historical average after adjusting for interest rates and the amount of money in the economy. For example, if interest rates rise, then the index will rise too, if there is a stimulus then the index will fall. Critique my idea please. [link] [comments]  |
| The Dark Money Secretly Bankrolling Activist Short-Sellers Posted: 01 Jan 2021 04:21 AM PST |
| When will the current euphoria burst the bubble? Posted: 31 Dec 2020 08:47 AM PST After the fed pumps of the market, the SPY is significantly higher than prior to the pandemic. Even with concerning economic status of the country (to put it mildly), many stocks are exponentially increasing in value. Perfect example is Tesla, which just crossed $700 and moving rapidly to the upside. The P/E ratio for Tesla is around 1300x compared to Spy's 34x. I get that the hype around EV has been unprecedented and rising, but I'm concerned about the inevitable "burst" of the bubble. It's been hinted at by many analysts these past few months. My guess is that Tesla will be the first to go down, and following it would be the EV market. There is also the factor of dollar devaluation that has been generally ignored by the general public. I would like to know what theories you all have regarding the bubble and when you predict it's burst to be. Happy Holidays! [link] [comments]  |
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