CAPE: It Goes To 11

DoubleLine Shiller Enhanced CAPE webcast slides for the month of October 2018.

TAB I – DoubleLine Shiller Enhanced CAPE® Strategies

DoubleLine Shiller Enhanced CAPE® Structure

  • The distinct structure of the DoubleLine Shiller Enhanced CAPE® Strategy allows investors to simultaneously access returns of the equity markets and fixed income markets. By using an equity index swap, $1 invested in the strategy provides approximately $1 of exposure to each market.

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Q3 hedge fund letters, conference, scoops etc

CAPE It Goes To 11

DoubleLine Shiller Enhanced International CAPE®

  • The distinct structure of the DoubleLine Shiller Enhanced International CAPE® Strategy allows investors to simultaneously access returns of the equity markets and fixed income markets. By using an equity index swap, $1 invested in the strategy provides approximately $1 of exposure to each market.

Doubleline Shiller Enhanced CAPE It Goes To 11

TAB II - From 10 to 11: Redefining Telecommunications

New GICS Sector

CAPE It Goes To 11

Evolution of Telecom to Communications Services

CAPE It Goes To 11

S&P 500 GICS Sector Weights

CAPE It Goes To 11

Relative CAPE® Old versus New: Communications Sector

CAPE It Goes To 11

Relative CAPE® Old versus New: Information Technology

CAPE It Goes To 11

Relative CAPE® Old versus New: Consumer Discretionary

CAPE It Goes To 11

TAB III - Smart Beta: Shiller Barclays CAPE® U.S. Sector Index

Shiller Barclays CAPE® U.S. Sector Index

CAPE It Goes To 11

What is the CAPE® Ratio?

  • Acclaimed value investors Benjamin Graham and David Dodd noted in Security Analysis that equity valuations tend to follow a business cycle of 3-7 years
  • The CAPE® Ratio was formulated in the seminal 1988 piece1 from Professor Robert Shiller and John Campbell.
  • CAPE® = Cyclically Adjusted P/E (Price-to-Earnings)

CAPE It Goes To 11

  • The CAPE® ratio seeks to assess longer term equity valuation by using an inflation adjusted earnings horizon that is 10 times longer than the traditional P/E measure
  • Similar to the traditional P/E the CAPE® can be applied to a portfolio of equities, a sector or a broad based index

Relative CAPE® Indicator

  • To account for idiosyncratic differences between sectors where CAPE® Ratios have historically been of different magnitudes one can construct a Relative CAPE® Ratio
  • This may allow investors to compare sector valuations on a level playing field

CAPE It Goes To 11

See the full slides below.



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver