2011 - Page 104 Of 104

Valuation-Informed Indexing #24: Does Shiller Endorse Valuation-Informed Indexing?

by Rob Bennett

I make bold claims in this column. I say that long-term stock returns are predictable. I say that the wild bull market of the late 1990s was the primary cause of the economic crisis. I say that stock prices are determined in the short term primarily by investor emotion rather than by rational responses to economic developments. I call the model of understanding stock investing being put forward Valuation-Informed Indexing and claim that it is rooted in the research of Yale Economics Professor Robert Shiller and in the arguments advanced in his book Irrational Exuberance.

This is a great article Whitney Tilson wrote up. Tilson besides for being famous in the investment world is also very involved in education. Tilson is on the boards of KIPP charter schools and the Council of Urban Professionals in New York and of the National Alliance for Public Charter Schools, one of the founders of Democrats for Education Reform, and the co-founder of the Rewarding Achievement (REACH) program.

Although I do not agree with his thesis that because China has a better education system they will surpass the West, he definitely makes a good argument below.

Thoughts For 2011

Tim Du Toit of www.EuroShareLab.com

Looking back at 2010 it turned out a lot better than I expected. After the market rollercoaster ride of the last few years it was nice to have a relatively stable year.

The main indices returned the following:

German DAX +16,1%

European STOXX 600 + 8,6%

US S&P 500 +12,8%

US Dow Jones +11,0%

European STOXX 50 + 0,0%

But what to make of 2011?

Whitney Tilson Annual Shareholder Letter

Whitney Tilson is the founder and Managing Partner of T2 Partners LLC and the Tilson Mutual Funds. The former (http://www.T2PartnersLLC.com) … Read more

Re-examining the Poison Pill

click to enlarge

Frank Voisin is a value investor and independent analyst whose site, Frankly Speaking, contains Frank’s investment theses as well as educational material to help investors avoid value traps. Subscribe to Frank’s feed here.

The poison pill, also known as a shareholder rights plan, is a defensive tactic used by companies to defend against hostile takeovers. The poison pill allows current shareholders to buy more shares at a massive discount, which would increase the cost of an acquisition. This forces bidders to negotiate with the company’s board of directors, rather than going directly to shareholders. For value investors, it is important to consider the presence of poison pills, because a potential catalyst – an acquisition of the undervalued company – is eliminated.

http://seekingdelta.wordpress.com/

Robert Shiller was on CNBC New Year’s Eve to make his forecast for the S&P 500 index in 2020. His best guess is a 1430 level which works out to 14% price appreciation over the next ten years or 1.3% annually. Taking no issue with the P/E multiple he uses but only analyzing the earning forecast I believe he may be slightly optimistic. He arrives at the 1430 level as follows:

Integrated Electrical Services, Inc (IESC) – Who are you in bed with?

When investing in a company, it is important to consider the identity of the company’s other major owners and creditors. Sometimes other stakeholders have a major effect – positive or negative – on the company’s operations. For example, a fellow stakeholder may act as a catalyst, launching a bid for the company or using its position on the board to push for the sale of non-core assets or for the distribution of cash. In other instances, however, the stakeholder can wield its power to the detriment of the company and other shareholders.

Valuation-Informed Indexing #23: Even Stock Pickers Can Benefit from Allocation Shifts

by Rob Bennett

Valuation-Informed Indexing is obviously a strategy for indexers, not stock pickers. Those who can pick stocks effectively can avoid the risks of overvaluation. There are always some stocks that do well. Pick those even at times of insanely high overvaluations and you will not suffer the fate of indexers following Buy-and-Hold strategies. Indexers obtain market returns both when that is a good thing and when it is not. Effective stock pickers can realistically expect to earn better than market returns and that’s an important distinction at times when high valuations virtually insure poor long-term returns for indexers.

Happy New Years

I hope everyone had a happy New Years. We had quite successful year in our first year at Value Walk. I want to thank all the new and old readers for coming to the site and making it a success beyond my wildest imagination. I will give stats about our readership on our official anniversiry, January 21st.

First off everyone should know there is the option to subscribe in a reader (for people who have never used Google reader, I highly recommend it. It is very easy to navigate and is an awesome tool to read articles and get company fillings from the SEC) or by email. This way you can read great content without visiting the site. The option can always be found in the right toolbar but I will also provide it below.

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Stock Market Starting to Look Cheap! Eight Metrics Below

I am sometimes asked what is the point of measuring the stock market valuation, I clarified why I started this … Read more

The Week Ahead

For Value Investors, macroeconomic news often takes a backseat to fundamental analysis. Mr. Market tends to overreact in the face of macroeconomic news, which may lead to value opportunities or good exits. It is important to be aware of macroeconomic developments, so in that spirit, here’s this week’s calendar:

Stock Market Valuation: January 1st 2011

I update market valuations on a monthly basis. The point of this article is to measure the stock market based on seven different metrics. This article does not look at the macro picture and try to predict where the economy is headed. It only uses these several metrics which have been very good past indicators of whether the market is fairly valued.

This month with the help of my colleague http://seekingdelta.wordpress.com/ , I am adding the seventh metric- AAII-Investor Survey.
I collaborate with two colleagues of mine for some of the data in this article, Doug Short of dshort.com and my friend who runs http://seekingdelta.wordpress.com. Both are great sites, and I encourage readers to check them out.

Salix Pharma: Still Has Room To Run

The company also added commentary about its products: “Xifaxan continues to grow sequentially, with prescriptions, on a milligram basis, … Read more

The Best and Worst of the S&P 500 in 2010

http://seekingdelta.wordpress.com

As an investor with contrarian tendencies I am always scanning sectors and stocks that may have underperformed in the past looking for solid values. With this in mind I present the best and worst of the S&P 500 from 2010.

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