S&P 500 (.INX) “Intrinsic Value Index” Soars To $1903
The Dallas Fed reported its 12mo Trimmed Mean PCE core inflation measure at 1.3%. Inflation remains relatively low-see their table below.
Nishkama Capital On GARP Investment Management
Nishkama Capital - Ravee Mehta On GARP Investment Management [Part Two] This is part two of a two-part interview with Ravee Mehta, the founder and portfolio manager of Nishkama Capital LLC. The interview is part of ValueWalk’s Value Fund Interview Series. You can find part one of the interview here. Throughout this series, we are publishing Read More
For the S&P 500 (.INX) Intrinsic Value Index, this means that it advances to $1,903. The SP500 closed out October 2013 at $1,756.54. The market continues to remain in the range with appeal for deep Value Investors such as Warren Buffett-see the chart below.
Inflation remains contained, Real GDP is improving, Retail Sales are rising and more individuals are finding work each month. This makes for a very heady brew for economic expansion and higher stock prices. For bond holders the opposite is true as rates rise in response to investors gradually shifting capital from Fixed Income into Equity investments as investor confidence improves. Even today’s markets reflect a significant improvement in market psychology as can be seen by recent IPO activity. This is a good time to raise capital for ‘story’ stocks and they trade at Internet Bubble levels.
In general I advise investors avoid the IPO market as real value is available in more traditional names. With the Facebook and ‘Internet like’ IPOs one does not have valuation as a supporting parameter because these early stage companies do not have current earnings or enough revenue to justify current prices vs. the bulk of existing companies. These high fliers are priced on distant expectations which may never be fulfilled. Too much risk for serious investors!!
Investing is not about catching trading opportunities. If one wants to play the game a little one can always go to a discount trading firm with a little capital as long as one knows that what one is really doing is trying to catch changes in market psychology over relatively short periods of time. Trading is not how serious capital grows to become more serious capital! Serious capital requires understanding businesses and understanding how the markets price them in both good and bad markets. Then one buys for the period when businesses are cheap and hold till they become excessively priced. In my experience the time period between buying and selling a seriously considered investment is 5yrs-10yrs if it all works according to original expectations.