Small Cap Value heads Rejoice !!!

[Cantrip]

Very interesting take on where the value premium actually comes from, why large-value stopped working in the early 80's and why small-value stopped working more recently; value is really just short volatility.

Curious other value-heads thoughts on this. They are obviously selling a unique product that would drive them to have a unique view.

Parts 2 & 3 are where it really gets interesting:

https://www.logicafunds.com/talking-you ... ut-value-1
https://www.logicafunds.com/talking-you ... ut-value-2
https://www.logicafunds.com/talking-you ... ut-value-3

Maybe this is all just above my head but I prefer my more intuitive understandings (behavior and risk premium). Logica also has some radical views on the move to passive and how it will drive prices up as much as 50x and wreak havoc on the financial markets.

Thanks for the links to those articles. Very good read, and deserves its own thread. I think the idea of selling volatility being the primary driver of the value premium makes sense. He hypothesizes that the introduction of S&P futures eliminates the premium of large cap value, and the russell 2000 futures eliminates the premium of small cap value. Besides the coincidence of their introduction and loss of premiums, how would that mechanism work? Is it just an increase in correlation between stocks? I also would like to know if there are futures for the international, international small, and emerging markets and if so, when were they were introduced?

[Slick8503]

Thanks for the Logica articles. I agree that they do make some sense, especially regarding accounting changes affecting b/m, but I don’t follow the short vol explanation for recent value underperformance. I’m not a an expert on market history but I assumed the six or seven year period prior to the Covid sell off was a period of lower than normal volatility, yet value underperformed. Also, some of the other explanations given(1940s act etc) seem more like convenient explanations to fit a pre selected narrative. Not that the traditional value proponents are not guilty of that as well.

[Robert T]

Very interesting take on where the value premium actually comes from, why large-value stopped working in the early 80's and why small-value stopped working more recently; value is really just short volatility.

Curious other value-heads thoughts on this. They are obviously selling a unique product that would drive them to have a unique view.

Parts 2 & 3 are where it really gets interesting:

https://www.logicafunds.com/talking-you ... ut-value-1
https://www.logicafunds.com/talking-you ... ut-value-2
https://www.logicafunds.com/talking-you ... ut-value-3

Maybe this is all just above my head but I prefer my more intuitive understandings (behavior and risk premium). Logica also has some radical views on the move to passive and how it will drive prices up as much as 50x and wreak havoc on the financial markets.

A few observations:

From the second paper

For each individual stock, we calculate the value of a one year option using the above lognormal distributions of market value changes for Size and the prospect of style migration (Value to Growth, Growth to Value) determined by the market cap “distance” from the historical ratio of Growth to Value (Arnott’s “Relative Value of Value” -- approximate 5x differential from Part 1 of this series.)

• 1. The assumption here is that all returns of the small cap and large cap value portfolios are due to migration. However, Fama-French’s earlier migration study indicated almost 50% of LV excess return was from stocks that remained LV stocks (did not migrate). For Small Value, all excess return was from migration. Perhaps this is the reason that their option value approach, which only looks at migration, is lower than actual LV returns (as almost half the return – according to FF – did not come from migration).
  
  2. After trashing Arnott’s ‘relative value approach’ as having little/no predictive value (“rife with caveats”), they use it to determine the probability of migration on which their option model is based.

On value and volatility

• 1. The analysis just seems to suggest – that when risks show-up (as reflected by rising volatility) small value does poorly (e.g. current environment). i.e. a risk factor.
  
  
  
  2. The period 1943-1982 was also a period of relatively high inflation and rising interest rates – which were good for (large) value stocks – raising confounding questions on the articles view that it was actually not (inflation and interest rates – which the article doesn’t discuss), but a low volatility environment that drove better large value performance in this period. But I agree with the notion that when risks don’t show-up value does relatively well, when they do show up (e.g. 2020) then value does relatively poorly.
  
  3. The reason (in my view) that the small value effect has been larger than the large value effect is its hard to disentangle size and value – small cap stocks (by definition) have a larger value tilt: Market cap = earnings per share * (price per share/earnings per share) * number of shares.

From the paper:

Hopefully, by now we’ve established that the Value factor is primarily a short volatility trade

• 1. Well, lets look at the data. If we compare correlations of Short Volatility (as reflected by ProShares Short VIX Short-Term Futures) with small and large value long only funds (as reflected by DFA funds) the correlation with short volatility (at least since 11/1/2011 when we have data for the ProShares funds), are similar to the correlations of short volatility and market returns. And if we get closer to a long-short value (as reflected by RALS) the correlation is 0.15 over the last (almost) 10 years.
  
  https://www.portfoliovisualizer.com/ass ... &months=36

Interesting series and analysis. IMHO not robust enough to trade (given above observations, but would be interested to see out of sample analysis for international markets).
.

[MotoTrojan]

A few observations:

Thank you for your well-stated thoughts.

[Robot Monster]

A few observations:

Thank you for your well-stated thoughts.

A few more observations:

[Wade Garrett]

Any ETFs out there using enterprise value or some other non-traditional value measure (P/E, P/B, etc.) besides QVAL and IVAL?

[MotoTrojan]

Any ETFs out there using enterprise value or some other non-traditional value measure (P/E, P/B, etc.) besides QVAL and IVAL?

FTSE RAFI (Sales, Cashflow, Dividends, Book Value) and Russell RAFI (Adjusted Sales, Retained Cashflow, Dividends+Buybacks) ETFs are out there for many classes, not sure if that would meet your qualification.

ZIG is another ETF that uses enterprise value predominantly (it also holds financials which have to use a different metric) although it is 130/30 long/short and doesn't have much transparency to it's process.

Tobias (creator of ZIG) has acquired DVP and named it DEEP which is another out there. I have heard rumblings this may end up converting to a micro-cap deep-value fund: https://finance.yahoo.com/news/introduc ... 00282.html

[texasfight]

Thread on value vs. growth. I expect value factor believers will continue to live in denial about the trajectory of the US economy.

I do expect a short term period of value outperformance since the divergence is so wide (and real rates rising). If you are gonna stick to value, make sure to have a heavy allocation to duration, and IMO I would hold something multifactor like VFMF (which outperforms its value exposure in my opinion).

https://twitter.com/ViscosityRedux/stat ... 77088?s=20

I expect nasdaq 100 to trade at around a 150x P/E ratio in the next decade.

[MotoTrojan]

I expect nasdaq 100 to trade at around a 150x P/E ratio in the next decade.

[Forester]

Mixed picture on value ETFs today (bank stocks the difference). IMHO either use an ETF with mediocre value measures but with sector neutrality (VLUE) which won't bottom out in a value crash; or an ETF using the best value measure (QVAL) which will overload on cyclicals at the best & worst times. A bad fund would be Vanguard VTV, mediocre value measures and no sector neutrality, hence big dumb bet on Financials.

[MotoTrojan]

Mixed picture on value ETFs today (bank stocks the difference). IMHO either use an ETF with mediocre value measures but with sector neutrality (VLUE) which won't bottom out in a value crash; or an ETF using the best value measure (QVAL) which will overload on cyclicals at the best & worst times. A bad fund would be Vanguard VTV, mediocre value measures and no sector neutrality, hence big dumb bet on Financials.

VTV isn't nearly as bad as VBR and VOE by the measure of tilt to financials. Right now I have a barbell of 50/50 VTV/VBR to balance QVAL/IVAL/FNDC. Still overweight financials overall, but not quite as bad as if I were 100% VTV.

[Steve Reading]

Mixed picture on value ETFs today (bank stocks the difference). IMHO either use an ETF with mediocre value measures but with sector neutrality (VLUE) which won't bottom out in a value crash; or an ETF using the best value measure (QVAL) which will overload on cyclicals at the best & worst times. A bad fund would be Vanguard VTV, mediocre value measures and no sector neutrality, hence big dumb bet on Financials.

FWIW, many of us don't actually believe EBIT/TEV is somehow the "best" value measure. I don't like it even from a theoretical basis, let alone as the only assessment of value. And the dumb, good old P/B FF factor also leans with sectors; I'm personally OK making sector bets if those sectors are the source of the value premium itself.

Additionally, for myself at least, the financials sector tilt is a feature, not a bug. I work in tech so I want little exposure to it through stocks (which VTV does very well). Additionally, as a young investor who is better off leveraging, investing in highly leveraged bank stocks does it to some extent too. VTV's (and VFMF's) tilt to financials is pretty modest but good enough for me.

Just my 2 cents.

[MotoTrojan]

Mixed picture on value ETFs today (bank stocks the difference). IMHO either use an ETF with mediocre value measures but with sector neutrality (VLUE) which won't bottom out in a value crash; or an ETF using the best value measure (QVAL) which will overload on cyclicals at the best & worst times. A bad fund would be Vanguard VTV, mediocre value measures and no sector neutrality, hence big dumb bet on Financials.

FWIW, many of us don't actually believe EBIT/TEV is somehow the "best" value measure. I don't like it even from a theoretical basis, let alone as the only assessment of value. And the dumb, good old P/B FF factor also leans with sectors; I'm personally OK making sector bets if those sectors are the source of the value premium itself.

Additionally, for myself at least, the financials sector tilt is a feature, not a bug. I work in tech so I want little exposure to it through stocks (which VTV does very well). Additionally, as a young investor who is better off leveraging, investing in highly leveraged bank stocks does it to some extent too. VTV's (and VFMF's) tilt to financials is pretty modest but good enough for me.

Just my 2 cents.

Curious to hear more about your feelings on EV/EBIT.

[nedsaid]

I expect nasdaq 100 to trade at around a 150x P/E ratio in the next decade.

You would need annual earnings growth of at least 30% a year to support that, I just don't think that is going to happen. The most you will get from more stable blue chip stocks is a P/E that is 2.5X the projected earnings growth rate or 3X at the very most. You can support a higher multiple than that with fast growers but publicly traded companies don't stay in a fast growth stage for more than a decade, I am talking about 20% earnings growth or more. An index like that would be dominated by stocks with closer to Blue Chip status and that won't support 150X earnings. You would have to go to smaller stocks to get that type of P/E and these stocks are more speculative in nature. There is such a thing as the law of gravity. This reminds me of the now laughable DOW 30,000 book that came out in about the year 2000.

[Steve Reading]

Mixed picture on value ETFs today (bank stocks the difference). IMHO either use an ETF with mediocre value measures but with sector neutrality (VLUE) which won't bottom out in a value crash; or an ETF using the best value measure (QVAL) which will overload on cyclicals at the best & worst times. A bad fund would be Vanguard VTV, mediocre value measures and no sector neutrality, hence big dumb bet on Financials.

FWIW, many of us don't actually believe EBIT/TEV is somehow the "best" value measure. I don't like it even from a theoretical basis, let alone as the only assessment of value. And the dumb, good old P/B FF factor also leans with sectors; I'm personally OK making sector bets if those sectors are the source of the value premium itself.

Additionally, for myself at least, the financials sector tilt is a feature, not a bug. I work in tech so I want little exposure to it through stocks (which VTV does very well). Additionally, as a young investor who is better off leveraging, investing in highly leveraged bank stocks does it to some extent too. VTV's (and VFMF's) tilt to financials is pretty modest but good enough for me.

Just my 2 cents.

Curious to hear more about your feelings on EV/EBIT.

This is just my opinion, thinking about it as a fundamental investor. Don't let the below deter you, it's just to show that some of us don't necessarily love the measure.
If you just sit down and ponder how you want to value a business my ideal method would be to compare:
1) How much I have to pay for it vs
2) How much I get for that price.

To me, P/B fits the bill perfectly. Book value is what the business is worth today (real estate, materials, etc), including intangibles (goodwill, patents, etc). And price is what it costs me. Now, P/B isn't perfect especially with businesses where a large portion of their value are intangibles, intellectual property, etc that are hard to value. What measure would take it into account? I think some measure of earnings would, since companies that thrive on intellectual property development most likely will show it through earnings or sales. So my preference is to pair my ideal measure (P/B) with others like P/E, forward P/E, sales, profitability, etc. Funds that use composites (RAFI, CRSP, etc), while they seem dumb and simplistic, are actually exactly what I fundamentally want done.

EV/EBIT is strange to me for many reasons. It's a measure of earnings for one thing (not book value) so it already is less desirable IMO. I like earnings as a value gauge to complement some form of book value or liquidation value measure, not a replacement. And as an earnings measure, I don't even like it that much. The earnings are before taxes. I'd rather the earnings were after taxes since that's what I get as an investor. Does that add a layer of complexity due to different accounting practices? Yeah. But since these are funds investing in hundreds of companies, the noise cancels out in my view.

I also don't like the enterprise value as a denominator. It doesn't include goodwill and intangibles, which makes companies like Google appear far more expensive than they actually are.


The reality is that QVAL uses EV/EBIT because they backtested it and it was the best one. There's not even some intuition as to why it might be superior in Gray's book. It's just pure data mining. Gray has literally released papers showing the premium due to EV/EBIT is purely from mispricing and not consistent with a risk story. This kind of past free lunch is exactly the one I don't expect to continue. Is it any wonder that simulated QVAL data has very high FF alpha, but since inception, QVAL's FF alpha is very negative? Both Gray and Greenblatt have literally authored books on this, for everyone to read and implement. It just doesn't pass my sniff test.

TL;DR: It's not measuring the things I want it to. What it does measure, it doesn't even do it how I'd like it. And it's only one measure, instead of a composite. I have little faith for it going forward.

[MotoTrojan]

Mixed picture on value ETFs today (bank stocks the difference). IMHO either use an ETF with mediocre value measures but with sector neutrality (VLUE) which won't bottom out in a value crash; or an ETF using the best value measure (QVAL) which will overload on cyclicals at the best & worst times. A bad fund would be Vanguard VTV, mediocre value measures and no sector neutrality, hence big dumb bet on Financials.

FWIW, many of us don't actually believe EBIT/TEV is somehow the "best" value measure. I don't like it even from a theoretical basis, let alone as the only assessment of value. And the dumb, good old P/B FF factor also leans with sectors; I'm personally OK making sector bets if those sectors are the source of the value premium itself.

Additionally, for myself at least, the financials sector tilt is a feature, not a bug. I work in tech so I want little exposure to it through stocks (which VTV does very well). Additionally, as a young investor who is better off leveraging, investing in highly leveraged bank stocks does it to some extent too. VTV's (and VFMF's) tilt to financials is pretty modest but good enough for me.

Just my 2 cents.

Curious to hear more about your feelings on EV/EBIT.

This is just my opinion, thinking about it as a fundamental investor. Don't let the below deter you, it's just to show that some of us don't necessarily love the measure.
If you just sit down and ponder how you want to value a business my ideal method would be to compare:
1) How much I have to pay for it vs
2) How much I get for that price.

To me, P/B fits the bill perfectly. Book value is what the business is worth today (real estate, materials, etc), including intangibles (goodwill, patents, etc). And price is what it costs me. Now, P/B isn't perfect especially with businesses where a large portion of their value are intangibles, intellectual property, etc that are hard to value. What measure would take it into account? I think some measure of earnings would, since companies that thrive on intellectual property development most likely will show it through earnings or sales. So my preference is to pair my ideal measure (P/B) with others like P/E, forward P/E, sales, profitability, etc. Funds that use composites (RAFI, CRSP, etc), while they seem dumb and simplistic, are actually exactly what I fundamentally want done.

EV/EBIT is strange to me for many reasons. It's a measure of earnings for one thing (not book value) so it already is less desirable IMO. I like earnings as a value gauge to complement some form of book value or liquidation value measure, not a replacement. And as an earnings measure, I don't even like it that much. The earnings are before taxes. I'd rather the earnings were after taxes since that's what I get as an investor. Does that add a layer of complexity due to different accounting practices? Yeah. But since these are funds investing in hundreds of companies, the noise cancels out in my view.

I also don't like the enterprise value as a denominator. It doesn't include goodwill and intangibles, which makes companies like Google appear far more expensive than they actually are.


The reality is that QVAL uses EV/EBIT because they backtested it and it was the best one. There's not even some intuition as to why it might be superior in Gray's book. It's just pure data mining. Gray has literally released papers showing the premium due to EV/EBIT is purely from mispricing and not consistent with a risk story. This kind of past free lunch is exactly the one I don't expect to continue. Is it any wonder that simulated QVAL data has very high FF alpha, but since inception, QVAL's FF alpha is very negative? Both Gray and Greenblatt have literally authored books on this, for everyone to read and implement. It just doesn't pass my sniff test.

TL;DR: It's not measuring the things I want it to. What it does measure, it doesn't even do it how I'd like it. And it's only one measure, instead of a composite. I have little faith for it going forward.

Well said, thanks for taking the time to write that up. I agree P is what you pay, but in particular there is some merit IMHO to enterprise value for deep value, particularly if there’s any chance of liquidation (P is not what is paid there, far from it often). Gray may not touch on this as much but Toby certainly does in his writings.

I do like the blended approach of CRSP/RAFI as you noted and most of my portfolio is in those indices. Jim O at OSAM is also big on the composite approach. I don’t think it matters hugely which you use in the long run, for me I like QVAL most for the genuinely deep exposure more so than the metric, plus I like the quality after value approach. I’ve used their active share tool on even the “good” funds like Avantis and there are companies all over the map on various metrics; at quick glance it’s hard to discern it from a cap-weighted fund while QVAL is tightly in the value decile.

Also AFAIK Greenblatt is the earliest to have mentioned EV/EBIT, in his Magic Formula.

Forward P/E has one of the worst backtests and is odd intuitively (relies on human judgement) so I am not sure how I feel about CRSP using it. I prefer RAFI approach from that front; smoothed 5 year data is a nice approach.

[Steve Reading]

Well said, thanks for taking the time to write that up. I agree P is what you pay, but in particular there is some merit IMHO to enterprise value for deep value, particularly if there’s any chance of liquidation (P is not what is paid there, far from it often). Gray may not touch on this as much but Toby certainly does in his writings.

Sorry, I don't see the merit. There is no additional information that EV contains that P/B doesn't already. EV is just = market cap - cash + debts. Since P/B already includes cash and debt (with opposing signs, now in the denominator instead), it's just as good or bad when dealing with "deep value".

What you're referring to is that when a deep value company goes bankrupt, the acquisition price will be much lower than its market cap or even book value. So what looked like a bargain ends up being terrible. I'm not really sure how that's relevant since neither EV nor P/B helps against that.

[Steve Reading]

Forward P/E has one of the worst backtests and is odd intuitively (relies on human judgement) so I am not sure how I feel about CRSP using it. I prefer RAFI approach from that front; smoothed 5 year data is a nice approach.

Intuitively, forward P/E is just fine IMO. There's human judgement but since we're using funds that buy hundreds of thousands of companies, the noise averages out. It will be wrong for every given company but it should not be systematically wrong over thousands of stocks. Even if you had reason to believe that the market systematically under or over estimates forward P/Es, that's actually still just fine. You'd only run into trouble if the market systematically under-estimated the forward P/E of the companies that ended up with the higher future P/Es and vice-versa. Only then is it problematic.

Now, by using EV/EBIT, which ignores intangibles completely, you will be systematically off because you're effectively rounding down all intangibles to zero so the noise isn't symmetrical now.

The only measure I couldn't give a heck about are dividends. So silly that RAFI uses them.

[MotoTrojan]

Well said, thanks for taking the time to write that up. I agree P is what you pay, but in particular there is some merit IMHO to enterprise value for deep value, particularly if there’s any chance of liquidation (P is not what is paid there, far from it often). Gray may not touch on this as much but Toby certainly does in his writings.

Sorry, I don't see the merit. There is no additional information that EV contains that P/B doesn't already. EV is just = market cap - cash + debts. Since P/B already includes cash and debt (with opposing signs, now in the denominator instead), it's just as good or bad when dealing with "deep value".

What you're referring to is that when a deep value company goes bankrupt, the acquisition price will be much lower than its market cap or even book value. So what looked like a bargain ends up being terrible. I'm not really sure how that's relevant since neither EV nor P/B helps against that.

Perhaps P/B adjusts for it, so my point is perhaps more pertinent to EV/EBIT vs. P/E. One of the AlphaA employees posted an interesting example on twitter recently:

You have $1M in cash and want to buy an investment property. There are two options:

House A has property/land worth $1M and will generate $100K/year in net rent profit (earnings).

House B has property/land worth $100K and a bag of $900K cash sitting inside, and will also generate $100K/year in profit.

P/E would value both of these the same, where-as EV/EBIT would show House B (edit) being cheaper. Actually even P/B would view these as equivalent, no?

[Steve Reading]

Well said, thanks for taking the time to write that up. I agree P is what you pay, but in particular there is some merit IMHO to enterprise value for deep value, particularly if there’s any chance of liquidation (P is not what is paid there, far from it often). Gray may not touch on this as much but Toby certainly does in his writings.

Sorry, I don't see the merit. There is no additional information that EV contains that P/B doesn't already. EV is just = market cap - cash + debts. Since P/B already includes cash and debt (with opposing signs, now in the denominator instead), it's just as good or bad when dealing with "deep value".

What you're referring to is that when a deep value company goes bankrupt, the acquisition price will be much lower than its market cap or even book value. So what looked like a bargain ends up being terrible. I'm not really sure how that's relevant since neither EV nor P/B helps against that.

Perhaps P/B adjusts for it, so my point is perhaps more pertinent to EV/EBIT vs. P/E. One of the AlphaA employees posted an interesting example on twitter recently:

You have $1M in cash and want to buy an investment property. There are two options:

House A has property/land worth $1M and will generate $100K/year in net rent profit (earnings).

House B has property/land worth $100K and a bag of $900K cash sitting inside, and will also generate $100K/year in profit.

P/E would value both of these the same, where-as EV/EBIT would show House A being cheaper. Actually even P/B would view these as equivalent, no?

If they both cost $1M (I'm assuming that... you didn't say this), EV/EBIT should show House A to be more expensive actually. Around 10x in fact.

But consider this instead:
Company A has property/land worth $1M, costs $1M to buy (market cap), and will generate $100K/year in net rent profit (earnings).

Company B has property/land worth $100K, a bag of $900K cash sitting inside, costs $1.9M to buy (market cap), and will also generate $100K/year in profit.

EV/EBIT would value these the same. P/E and P/B would both say House A is cheaper. Which one do you believe?

Bonus questions: If Companies A and B were to trade in a liquid exchange, with plenty of price discovery, which set of prices do you think is more realistic for them, the ones the AA employee suggests or the ones I propose? Given that, which metric seems to find value in the real world?

[MotoTrojan]

Well said, thanks for taking the time to write that up. I agree P is what you pay, but in particular there is some merit IMHO to enterprise value for deep value, particularly if there’s any chance of liquidation (P is not what is paid there, far from it often). Gray may not touch on this as much but Toby certainly does in his writings.

Sorry, I don't see the merit. There is no additional information that EV contains that P/B doesn't already. EV is just = market cap - cash + debts. Since P/B already includes cash and debt (with opposing signs, now in the denominator instead), it's just as good or bad when dealing with "deep value".

What you're referring to is that when a deep value company goes bankrupt, the acquisition price will be much lower than its market cap or even book value. So what looked like a bargain ends up being terrible. I'm not really sure how that's relevant since neither EV nor P/B helps against that.

Perhaps P/B adjusts for it, so my point is perhaps more pertinent to EV/EBIT vs. P/E. One of the AlphaA employees posted an interesting example on twitter recently:

You have $1M in cash and want to buy an investment property. There are two options:

House A has property/land worth $1M and will generate $100K/year in net rent profit (earnings).

House B has property/land worth $100K and a bag of $900K cash sitting inside, and will also generate $100K/year in profit.

P/E would value both of these the same, where-as EV/EBIT would show House A being cheaper. Actually even P/B would view these as equivalent, no?

If they both cost $1M (I'm assuming that... you didn't say this), EV/EBIT should show House A to be more expensive actually. Around 10x in fact.

But consider this instead:
Company A has property/land worth $1M, costs $1M to buy (market cap), and will generate $100K/year in net rent profit (earnings).

Company B has property/land worth $100K, a bag of $900K cash sitting inside, costs $1.9M to buy (market cap), and will also generate $100K/year in profit.

EV/EBIT would value these the same. P/E and P/B would both say House A is cheaper. Which one do you believe?

Bonus questions: If Companies A and B were to trade in a liquid exchange, with plenty of price discovery, which set of prices do you think is more realistic for them, the ones the AA employee suggests or the ones I propose? Given that, which metric seems to find value in the real world?

Oops typed that out backwards on which is cheaper. Your example is very interesting though and something to think more on, thanks. I actually am thinking EV/EBIT handled your example better than the alternatives... they should be valued equivalently, I think P/E and P/B favoring House A is actually an example of them failing.

[Steve Reading]

Well said, thanks for taking the time to write that up. I agree P is what you pay, but in particular there is some merit IMHO to enterprise value for deep value, particularly if there’s any chance of liquidation (P is not what is paid there, far from it often). Gray may not touch on this as much but Toby certainly does in his writings.

Sorry, I don't see the merit. There is no additional information that EV contains that P/B doesn't already. EV is just = market cap - cash + debts. Since P/B already includes cash and debt (with opposing signs, now in the denominator instead), it's just as good or bad when dealing with "deep value".

What you're referring to is that when a deep value company goes bankrupt, the acquisition price will be much lower than its market cap or even book value. So what looked like a bargain ends up being terrible. I'm not really sure how that's relevant since neither EV nor P/B helps against that.

Perhaps P/B adjusts for it, so my point is perhaps more pertinent to EV/EBIT vs. P/E. One of the AlphaA employees posted an interesting example on twitter recently:

You have $1M in cash and want to buy an investment property. There are two options:

House A has property/land worth $1M and will generate $100K/year in net rent profit (earnings).

House B has property/land worth $100K and a bag of $900K cash sitting inside, and will also generate $100K/year in profit.

P/E would value both of these the same, where-as EV/EBIT would show House A being cheaper. Actually even P/B would view these as equivalent, no?

If they both cost $1M (I'm assuming that... you didn't say this), EV/EBIT should show House A to be more expensive actually. Around 10x in fact.

But consider this instead:
Company A has property/land worth $1M, costs $1M to buy (market cap), and will generate $100K/year in net rent profit (earnings).

Company B has property/land worth $100K, a bag of $900K cash sitting inside, costs $1.9M to buy (market cap), and will also generate $100K/year in profit.

EV/EBIT would value these the same. P/E and P/B would both say House A is cheaper. Which one do you believe?

Bonus questions: If Companies A and B were to trade in a liquid exchange, with plenty of price discovery, which set of prices do you think is more realistic for them, the ones the AA employee suggests or the ones I propose? Given that, which metric seems to find value in the real world?

Oops typed that out backwards on which is cheaper. Your example is very interesting though and something to think more on, thanks. I actually am thinking EV/EBIT handled your example better than the alternatives... they should be valued equivalently, I think P/E and P/B favoring House A is actually an example of them failing.

In my example, with option A, you'd pay $1M for $1M of real estate and earnings of $100K. With option B, you also pay effectively $1M ($1.9M but get 900K back) but now end up with real estate valued only at $100K, earning the same. I'd opt for option A every time all else equal. I also think this is a much more realistic scenario since option B should cost closer to $1.9M than $1M in a liquid market with price discovery (since the stock price is the future discounted cash flows, yadda yadda...).

As you can see, because P/B and P/E is choosing how I personally would choose in a more realistic scenario, then it's the metric I prefer. It sounds like EV/EBIT is the right metric for you. That's very important for staying the course!

[MotoTrojan]

Sorry, I don't see the merit. There is no additional information that EV contains that P/B doesn't already. EV is just = market cap - cash + debts. Since P/B already includes cash and debt (with opposing signs, now in the denominator instead), it's just as good or bad when dealing with "deep value".

What you're referring to is that when a deep value company goes bankrupt, the acquisition price will be much lower than its market cap or even book value. So what looked like a bargain ends up being terrible. I'm not really sure how that's relevant since neither EV nor P/B helps against that.

Perhaps P/B adjusts for it, so my point is perhaps more pertinent to EV/EBIT vs. P/E. One of the AlphaA employees posted an interesting example on twitter recently:

You have $1M in cash and want to buy an investment property. There are two options:

House A has property/land worth $1M and will generate $100K/year in net rent profit (earnings).

House B has property/land worth $100K and a bag of $900K cash sitting inside, and will also generate $100K/year in profit.

P/E would value both of these the same, where-as EV/EBIT would show House A being cheaper. Actually even P/B would view these as equivalent, no?

If they both cost $1M (I'm assuming that... you didn't say this), EV/EBIT should show House A to be more expensive actually. Around 10x in fact.

But consider this instead:
Company A has property/land worth $1M, costs $1M to buy (market cap), and will generate $100K/year in net rent profit (earnings).

Company B has property/land worth $100K, a bag of $900K cash sitting inside, costs $1.9M to buy (market cap), and will also generate $100K/year in profit.

EV/EBIT would value these the same. P/E and P/B would both say House A is cheaper. Which one do you believe?

Bonus questions: If Companies A and B were to trade in a liquid exchange, with plenty of price discovery, which set of prices do you think is more realistic for them, the ones the AA employee suggests or the ones I propose? Given that, which metric seems to find value in the real world?

Oops typed that out backwards on which is cheaper. Your example is very interesting though and something to think more on, thanks. I actually am thinking EV/EBIT handled your example better than the alternatives... they should be valued equivalently, I think P/E and P/B favoring House A is actually an example of them failing.

In my example, with option A, you'd pay $1M for $1M of real estate and earnings of $100K. With option B, you also pay effectively $1M ($1.9M but get 900K back) but now end up with real estate valued only at $100K, earning the same. I'd opt for option A every time all else equal. I also think this is a much more realistic scenario since option B should cost closer to $1.9M than $1M in a liquid market with price discovery (since the stock price is the future discounted cash flows, yadda yadda...).

As you can see, because P/B and P/E is choosing how I personally would choose in a more realistic scenario, then it's the metric I prefer. It sounds like EV/EBIT is the right metric for you. That's very important for staying the course!

Makes sense indeed, your House B is certainly the growth firm . Interesting perspective.

If we flip it though and use debt (more likely a company has a ton of debt than is mostly cash) would that not reverse the perspective in EV’s favor?

[Forester]

Verdad Advisers;

Why is Buffett investing in Japan today? We bet it has something to do with the massive valuation disconnect shown above: Japan is one of the few value investments available in today’s global developed markets.

https://t.co/KnyifXyI1l?amp=1

---

Ed Harrison;

Bullish on US LCV in the medium to long term, versus the "stay at home" tech stocks (around 10min onward). https://www.theinvestorspodcast.com/epi ... onditions/

[dml130]

Would anybody advocate investing in the broader s&p 600 (as opposed to specifically s&p 600 value) as a sufficient value position at this point in time? I was looking at morningstar metrics and s&p 600 average p/s is .78 and price to cash flow is about 6, for example. That to me seems to have a value tilt with the added benefit of more diversification and maybe more quality metrics. Any thoughts?

[MotoTrojan]

Would anybody advocate investing in the broader s&p 600 (as opposed to specifically s&p 600 value) as a sufficient value position at this point in time? I was looking at morningstar metrics and s&p 600 average p/s is .78 and price to cash flow is about 6, for example. That to me seems to have a value tilt with the added benefit of more diversification and maybe more quality metrics. Any thoughts?

I could see justifying it myself if that is all I had available (say in a 401k), but personally would prefer the true value variant. Curious why you are averse to the value side? It has plenty of diversification and according to the 5-factor regression here, the value fund has actually had better exposure to RMW (quality) with much more HML exposure (the blend fund does indeed get some HML exposure):

https://www.portfoliovisualizer.com/fac ... sion=false

I would be careful about using P/S to compare value as it is highly susceptible to leverage (leverage makes companies look cheaper on this metric). See #1 here for how to correct this by using EV/S: https://www.oldschoolvalue.com/investin ... k-metrics/

[dml130]

I could see justifying it myself if that is all I had available (say in a 401k), but personally would prefer the true value variant. Curious why you are averse to the value side? It has plenty of diversification and according to the 5-factor regression here, the value fund has actually had better exposure to RMW (quality) with much more HML exposure (the blend fund does indeed get some HML exposure):

https://www.portfoliovisualizer.com/fac ... sion=false

I would be careful about using P/S to compare value as it is highly susceptible to leverage (leverage makes companies look cheaper on this metric). See #1 here for how to correct this by using EV/S: https://www.oldschoolvalue.com/investin ... k-metrics/

Thank you for the reply, I'll take a closer look at that. I guess my only aversion is that my thinking is influenced (maybe incorrectly, let me know what you think) by the idea that smaller financials (which compose a larger portion of SCV) as a whole are going to struggle and in many cases fail over the next 5 to 10 years due to the low rate environment. It would be easier for me to ignore except that those intelligent people mentioning such things point to the precedents set in Japan and Europe with failing banks, so my thinking is that minimizing exposure to financials and therefore looking at the broader s&p 600 might be the way to go.

[Forester]

Forward P/E has one of the worst backtests and is odd intuitively (relies on human judgement) so I am not sure how I feel about CRSP using it.

Timidity or 'appeal to authority' ? Hard to explain away.

[MotoTrojan]

Thank you for the reply, I'll take a closer look at that. I guess my only aversion is that my thinking is influenced (maybe incorrectly, let me know what you think) by the idea that smaller financials (which compose a larger portion of SCV) as a whole are going to struggle and in many cases fail over the next 5 to 10 years due to the low rate environment. It would be easier for me to ignore except that those intelligent people mentioning such things point to the precedents set in Japan and Europe with failing banks, so my thinking is that minimizing exposure to financials and therefore looking at the broader s&p 600 might be the way to go.

That may be true, but if you are looking to get value factor exposure you have to get comfortable buying things that have stories like this as that is a big explanation of the premium. Whether you think it is risk-related or behavioral, you are often going to be buying companies, sectors, or countries that have a scary story about them; if they didn't, you wouldn't expect a premium. One of my favorite anecdotes about this is Greenblatt's Magic Formula; he offered people two options, they could either get the list and buy/sell on their own, or have a fully-automated account that would run the strategy. The self-managed accounts underperformed the market, while the automated one had a strong outperformance. Just goes to show you that often times the scary companies are the winners.

Having said all that, S&P600 blend is still nearly 23% financials while value is 30%, so you aren't talking about a huge difference. You could go with something like FNDA which is just over 22% financials. Funny note while looking at FNDA... it's 2nd largest holding at 0.47% is TSLA! Funny quirk with these fundamental small-cap funds, the small comes from the economic scale and not the market-cap .

[dml130]

That may be true, but if you are looking to get value factor exposure you have to get comfortable buying things that have stories like this as that is a big explanation of the premium. Whether you think it is risk-related or behavioral, you are often going to be buying companies, sectors, or countries that have a scary story about them; if they didn't, you wouldn't expect a premium. One of my favorite anecdotes about this is Greenblatt's Magic Formula; he offered people two options, they could either get the list and buy/sell on their own, or have a fully-automated account that would run the strategy. The self-managed accounts underperformed the market, while the automated one had a strong outperformance. Just goes to show you that often times the scary companies are the winners.

Having said all that, S&P600 blend is still nearly 23% financials while value is 30%, so you aren't talking about a huge difference. You could go with something like FNDA which is just over 22% financials. Funny note while looking at FNDA... it's 2nd largest holding at 0.47% is TSLA! Funny quirk with these fundamental small-cap funds, the small comes from the economic scale and not the market-cap .

Thanks for that, I think what you say is often correct about the riskiest looking equities being the most profitable long term. I think your numbers might be off though with regards to the sector breakdown, VIOV (sp 600 value) shows 21% financials while VIOO shows 15%. I guess it's still roughly the same difference, with blend having 60-70% of what value has with regard to financials.

[MotoTrojan]

Thanks for that, I think what you say is often correct about the riskiest looking equities being the most profitable long term. I think your numbers might be off though with regards to the sector breakdown, VIOV (sp 600 value) shows 21% financials while VIOO shows 15%. I guess it's still roughly the same difference, with blend having 60-70% of what value has with regard to financials.

I used ETF.com's data set. I see the numbers on Vanguard's website are from 7/31/20, not sure if time or some other factor is driving the discrepency.

https://www.etf.com/VIOO#overview

https://www.etf.com/VIOV#overview

[dml130]

I would be careful about using P/S to compare value as it is highly susceptible to leverage (leverage makes companies look cheaper on this metric). See #1 here for how to correct this by using EV/S: https://www.oldschoolvalue.com/investin ... k-metrics/

I took a look at that link, thanks for the heads up. So if it's the case that price to sales (and the other popular ratios) are practically useless, are there any resources (morningstar or elsewhere) where I can find optimal aggregate measurements on etfs/indices?

[Steve Reading]

Funny note while looking at FNDA... it's 2nd largest holding at 0.47% is TSLA! Funny quirk with these fundamental small-cap funds, the small comes from the economic scale and not the market-cap .

Yeah you have to be careful when tilting to SCV with RAFI for that discontinuity. As long as you pair it with a RAFI LCV choice, you should be OK I think.

[MotoTrojan]

I would be careful about using P/S to compare value as it is highly susceptible to leverage (leverage makes companies look cheaper on this metric). See #1 here for how to correct this by using EV/S: https://www.oldschoolvalue.com/investin ... k-metrics/

I took a look at that link, thanks for the heads up. So if it's the case that price to sales (and the other popular ratios) are practically useless, are there any resources (morningstar or elsewhere) where I can find optimal aggregate measurements on etfs/indices?

I don't know any great resources but I also don't think all popular (easily found) ratios are useless.

[MotoTrojan]

Funny note while looking at FNDA... it's 2nd largest holding at 0.47% is TSLA! Funny quirk with these fundamental small-cap funds, the small comes from the economic scale and not the market-cap .

Yeah you have to be careful when tilting to SCV with RAFI for that discontinuity. As long as you pair it with a RAFI LCV choice, you should be OK I think.

Yeah not a big deal at these weights, but funny none-the-less. The only RAFI fund I use is FNDC (ex-US small-cap) but I don't lose any sleep over a growth company here or there sneaking in.

[dml130]

I would be careful about using P/S to compare value as it is highly susceptible to leverage (leverage makes companies look cheaper on this metric). See #1 here for how to correct this by using EV/S: https://www.oldschoolvalue.com/investin ... k-metrics/

I took a look at that link, thanks for the heads up. So if it's the case that price to sales (and the other popular ratios) are practically useless, are there any resources (morningstar or elsewhere) where I can find optimal aggregate measurements on etfs/indices?

I don't know any great resources but I also don't think all popular (easily found) ratios are useless.

I wonder if some of those easily found ratios might have more use when comparing over time. For example, I saw somewhere that the aggregate price to sales for the s&p 600 is well below previous years; on the other hand, the s&p 500 is well above its average. The reasons are probably more complex, but my inference was that there is probably a large behavioral/sentiment component to explain it.

[Steve Reading]

I would be careful about using P/S to compare value as it is highly susceptible to leverage (leverage makes companies look cheaper on this metric). See #1 here for how to correct this by using EV/S: https://www.oldschoolvalue.com/investin ... k-metrics/

I took a look at that link, thanks for the heads up. So if it's the case that price to sales (and the other popular ratios) are practically useless, are there any resources (morningstar or elsewhere) where I can find optimal aggregate measurements on etfs/indices?

Like I said before, these metrics aren't "useless". They all have small pros and cons. And let's settle this silly idea that somehow Enterprise value fixes your problems. Here's an explanation from Prof. Damodaran on the topic:
http://aswathdamodaran.blogspot.com/201 ... prise.html

"For instance, in acquisitions, where the acquiring firm is planning on acquiring the operating assets of the target firm, it is enterprise value that matters, since the acquiring firm will use its own mix of debt and equity to fund the acquisition and will not lay claim on the target company's cash. In contrast, if you are an individual investor in a publicly traded company, the market capitalization may be your best measure of value since you have little control over how much debt the company has or how much cash it holds. In fact, enterprise value based calculations can be misleading for individual investors, since they can mask default risk: a firm on the verge of default can look cheap on an EV basis."

What does fix your problems?
1) Using multiple measures (a composite) instead of just one measure.
2) Using funds that invest in hundreds or thousands of firms. This will average out a lot of noise.
3) Pair with profitability.

Does the above seem simplistic? Yes, it's unlikely to find free lunch, mispricings nowadays. But I think it's good enough to access the factor premia (if there are any to access!).

[MotoTrojan]

I would be careful about using P/S to compare value as it is highly susceptible to leverage (leverage makes companies look cheaper on this metric). See #1 here for how to correct this by using EV/S: https://www.oldschoolvalue.com/investin ... k-metrics/

I took a look at that link, thanks for the heads up. So if it's the case that price to sales (and the other popular ratios) are practically useless, are there any resources (morningstar or elsewhere) where I can find optimal aggregate measurements on etfs/indices?

Like I said before, these metrics aren't "useless". They all have small pros and cons. And let's settle this silly idea that somehow Enterprise value fixes your problems. Here's an explanation from Prof. Damodaran on the topic:
http://aswathdamodaran.blogspot.com/201 ... prise.html

While there are pros & cons, there are also combinations of numerators and denominators that make sense, and others that don't. The chart in the Damodaran link (very nice overview, thanks!) actually explicitly says not to use revenue divisors with market-value or firm-value, but says you can with both variants of EV.

[Steve Reading]

I would be careful about using P/S to compare value as it is highly susceptible to leverage (leverage makes companies look cheaper on this metric). See #1 here for how to correct this by using EV/S: https://www.oldschoolvalue.com/investin ... k-metrics/

I took a look at that link, thanks for the heads up. So if it's the case that price to sales (and the other popular ratios) are practically useless, are there any resources (morningstar or elsewhere) where I can find optimal aggregate measurements on etfs/indices?

Like I said before, these metrics aren't "useless". They all have small pros and cons. And let's settle this silly idea that somehow Enterprise value fixes your problems. Here's an explanation from Prof. Damodaran on the topic:
http://aswathdamodaran.blogspot.com/201 ... prise.html

While there are pros & cons, there are also combinations of numerators and denominators that make sense, and others that don't. The chart in the Damodaran link (very nice overview, thanks!) actually explicitly says not to use revenue divisors with market-value or firm-value, but says you can with both variants of EV.

Absolutely, the ratio needs to be consistent. You should really use sales along with EV. But dml130 mentioned "other popular ratios" are useless too, which I disagree with. P/B and P/E are consistent in both numerator and denominator, so they are reasonable. And I personally agree with Prof. Damodaran in that, yes, EV/EBIT also is a consistent ratio, but one I do not believe is as relevant for retail investors buying shares of publicly traded companies.

[XacTactX]

I just wanted to give you folks a heads up: DFA is doing a webinar on September 18 at 1:00 PM Central time. It's called Value vs. Growth: Past, Present, and Future. The past 3-4 years have been especially tough for value and I'm interested to see what insights they will have. I know there are some value investors on this forum and hopefully you will like it as well.

Click on the link below, click 'View Upcoming Webcasts' and you will be able to register for it.

https://us.dimensional.com/webcasts#upcoming-webcasts

[MotoTrojan]

I just wanted to give you folks a heads up: DFA is doing a webinar on September 18 at 1:00 PM Central time. It's called Value vs. Growth: Past, Present, and Future. The past 3-4 years have been especially tough for value and I'm interested to see what insights they will have. I know there are some value investors on this forum and hopefully you will like it as well.

Click on the link below, click 'View Upcoming Webcasts' and you will be able to register for it.

https://us.dimensional.com/webcasts#upcoming-webcasts

Interesting. Possible to watch these after the fact?

[XacTactX]

Yes I think it will be available afterward

[YRT70]

Would anybody advocate investing in the broader s&p 600 (as opposed to specifically s&p 600 value) as a sufficient value position at this point in time? I was looking at morningstar metrics and s&p 600 average p/s is .78 and price to cash flow is about 6, for example. That to me seems to have a value tilt with the added benefit of more diversification and maybe more quality metrics. Any thoughts?

As far as I know that could be just temporarily. Next month the metrics could look a lot less 'valuey'.

[dml130]

Absolutely, the ratio needs to be consistent. You should really use sales along with EV. But dml130 mentioned "other popular ratios" are useless too, which I disagree with. P/B and P/E are consistent in both numerator and denominator, so they are reasonable. And I personally agree with Prof. Damodaran in that, yes, EV/EBIT also is a consistent ratio, but one I do not believe is as relevant for retail investors buying shares of publicly traded companies.

Just to clarify, that wasn't a deeply held assertion of mine that the ratios are useless, it was the way I interpreted (incorrectly, I guess) what was being said. I reviewed the links on EV again, and they are helpful, I think I am starting to understand the argument. So, when looking at etf databases or other sources of information regarding etfs or indices, do you prefer to ignore those price to sales ratios altogether? And what about price to cash flow?

[MotoTrojan]

Would anybody advocate investing in the broader s&p 600 (as opposed to specifically s&p 600 value) as a sufficient value position at this point in time? I was looking at morningstar metrics and s&p 600 average p/s is .78 and price to cash flow is about 6, for example. That to me seems to have a value tilt with the added benefit of more diversification and maybe more quality metrics. Any thoughts?

As far as I know that could be just temporarily. Next month the metrics could look a lot less 'valuey'.

The 5-factor regression I posted above from 2005 to present (below again) shows a statistically significant 0.12 loading to HML which is a good chunk of the 0.33 the value variant had.

https://www.portfoliovisualizer.com/fac ... sion=false

If you prefer the classic 3-factor then the blend nets a full 0.23 out of 0.45.

https://www.portfoliovisualizer.com/fac ... sion=false

If you look at the rolling regression you'll note that HML has been drifting higher for both variants, although a much larger relative move on the blended fund. Even the growth fund has had several years now in the 0.15-0.20 realm.

[MotoTrojan]

Absolutely, the ratio needs to be consistent. You should really use sales along with EV. But dml130 mentioned "other popular ratios" are useless too, which I disagree with. P/B and P/E are consistent in both numerator and denominator, so they are reasonable. And I personally agree with Prof. Damodaran in that, yes, EV/EBIT also is a consistent ratio, but one I do not believe is as relevant for retail investors buying shares of publicly traded companies.

Just to clarify, that wasn't a deeply held assertion of mine that the ratios are useless, it was the way I interpreted (incorrectly, I guess) what was being said. I reviewed the links on EV again, and they are helpful, I think I am starting to understand the argument. So, when looking at etf databases or other sources of information regarding etfs or indices, do you prefer to ignore those price to sales ratios altogether? And what about price to cash flow?

It depends on your intent. If you are looking for factor exposure, I would say the best thing to do is find the raw index data (or a long-running ETF) and see how the regression looks. Comparing the ratios of ETFs is interesting but would not be the initial screen for me at-least when deciding between them. Process (and costs) are important. Steve posted some good thoughts on composite scores above, I also look at things like rebalance strategy (RAFI for example swapped to a quarterly traunched rebalance which I like as it reduces uncompensated rebalancing risk).

[dml130]

That's helpful, thanks!

Any thoughts on investing in small cap value with mutual funds such as Vanguard (VEVFX) as opposed to (or in addition to) etfs?

[Steve Reading]

Absolutely, the ratio needs to be consistent. You should really use sales along with EV. But dml130 mentioned "other popular ratios" are useless too, which I disagree with. P/B and P/E are consistent in both numerator and denominator, so they are reasonable. And I personally agree with Prof. Damodaran in that, yes, EV/EBIT also is a consistent ratio, but one I do not believe is as relevant for retail investors buying shares of publicly traded companies.

Just to clarify, that wasn't a deeply held assertion of mine that the ratios are useless, it was the way I interpreted (incorrectly, I guess) what was being said. I reviewed the links on EV again, and they are helpful, I think I am starting to understand the argument. So, when looking at etf databases or other sources of information regarding etfs or indices, do you prefer to ignore those price to sales ratios altogether? And what about price to cash flow?

I’ve never paid any attention to P/S or P/cash flow when looking at ETFs. But P/E and P/B I do look at.

I don’t use them to choose ETFs though. But they’re good info to confirm my choices.

[MotoTrojan]

That's helpful, thanks!

Any thoughts on investing in small cap value with mutual funds such as Vanguard (VEVFX) as opposed to (or in addition to) etfs?

Mutual fund vs. ETF is a whole different story and not really applicable to small-value specifically (for example VBR and VSIAX are both fine ways to access small-value depending on whether you prefer intra-day purchasing or not).

I am not very familiar with VEVFX but it has tracked closely with VBR/VSIAX mentioned above and regresses to near-identical factor loads as well. I would prefer a low-cost (7bp) passive index over an active fund personally. Also in this case the performance was similar, but one thing to keep in mind is that backtesting is not always a great way to decide between factor funds; for example value has done poorly recently, so it is likely that the better fund (the one that better achieved exposure to the desired factors) actually will have lower performance in the last decade.

[YRT70]

Would anybody advocate investing in the broader s&p 600 (as opposed to specifically s&p 600 value) as a sufficient value position at this point in time? I was looking at morningstar metrics and s&p 600 average p/s is .78 and price to cash flow is about 6, for example. That to me seems to have a value tilt with the added benefit of more diversification and maybe more quality metrics. Any thoughts?

As far as I know that could be just temporarily. Next month the metrics could look a lot less 'valuey'.

The 5-factor regression I posted above from 2005 to present (below again) shows a statistically significant 0.12 loading to HML which is a good chunk of the 0.33 the value variant had.

https://www.portfoliovisualizer.com/fac ... sion=false

If you prefer the classic 3-factor then the blend nets a full 0.23 out of 0.45.

https://www.portfoliovisualizer.com/fac ... sion=false

If you look at the rolling regression you'll note that HML has been drifting higher for both variants, although a much larger relative move on the blended fund. Even the growth fund has had several years now in the 0.15-0.20 realm.

Interesting. So what's your conclusion?