Value strategies

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TwoIdenticalIndexes
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Value strategies

Post by TwoIdenticalIndexes »

I'm back with the standard screed.

1. Asset values are completely ridiculous. Returns have been dragged forward to the detriment of early accumulators. If you think these values are remotely reasonable you are completely blind.
https://www.multpl.com/s-p-500-pe-ratio

2. What are your best strategies for obtaining reasonable buy and hold positions which are likely to have positive returns over the next 10 years. International / value seems overpriced, but less-so. I (unhappily) hold some commodities and bond for hedging purposes. Any other ideas?
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Ocean77
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Re: Value strategies

Post by Ocean77 »

For this reason, I have not been adding money to my passive portfolio lately (which consists of US and international index funds). For my fun account, where I occasionally pick my own stocks, I could still find good companies globally that sell for a PE between 10 and 15 even now. That's where I put money these days.
30% US Stocks | 30% Int Stocks | 40% Bonds
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burritoLover
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Re: Value strategies

Post by burritoLover »

You can't market time based on valuations with any long-term success. It has been shown time and time again with study after study. But maybe you are special. Maybe you are better than the vast majority of professional active market participants that fail to do this long-term.
asif408
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Re: Value strategies

Post by asif408 »

TwoIdenticalIndexes wrote: Thu Apr 15, 2021 12:14 pm I'm back with the standard screed.

1. Asset values are completely ridiculous.
Mainly in the US, not so much elsewhere. Most of the rest of the world is close to or slightly above average valuation wise. If you can show me, for instance, that the UK, Japan, and China (the largest parts of most international indices) are trading at ridiculous valuations I'd love to see the evidence.
TwoIdenticalIndexes wrote: Thu Apr 15, 2021 12:14 pm2. What are your best strategies for obtaining reasonable buy and hold positions which are likely to have positive returns over the next 10 years. International / value seems overpriced, but less-so. I (unhappily) hold some commodities and bond for hedging purposes. Any other ideas?
You answered your own question. Investing heavily in developed ex-US and EM value stocks is your best bet. Good luck finding a lot of support for a 70-80% international, heavily value tilted portfolio around here, though. Anything over 50% ex-US around here puts you in the eccentric category.
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Forester
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Re: Value strategies

Post by Forester »

TwoIdenticalIndexes wrote: Thu Apr 15, 2021 12:14 pm I'm back with the standard screed.

1. Asset values are completely ridiculous. Returns have been dragged forward to the detriment of early accumulators. If you think these values are remotely reasonable you are completely blind.
https://www.multpl.com/s-p-500-pe-ratio

2. What are your best strategies for obtaining reasonable buy and hold positions which are likely to have positive returns over the next 10 years. International / value seems overpriced, but less-so. I (unhappily) hold some commodities and bond for hedging purposes. Any other ideas?
I think about the world in 4 buckets - kind of similar to Merriman's portfolios.

1) US large/growth
2) US small/value
3) Ex-US large/growth
4) Ex-US small/value

As far as I can tell, only 25% of the global investable equity market is expensive, the rest is fairly valued, so no need to panic. And consider the 2000 dotcom peak, European CAPE, the CAPE of the overall European market, was 42. Japan was 75. So the ACWI index, arguably the true benchmark, was way more expensive in 2000 than 2021.

https://indices.barclays/IM/21/en/indic ... c-cape.app
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rascott
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Re: Value strategies

Post by rascott »

TwoIdenticalIndexes wrote: Thu Apr 15, 2021 12:14 pm I'm back with the standard screed.

1. Asset values are completely ridiculous. Returns have been dragged forward to the detriment of early accumulators. If you think these values are remotely reasonable you are completely blind.
https://www.multpl.com/s-p-500-pe-ratio

2. What are your best strategies for obtaining reasonable buy and hold positions which are likely to have positive returns over the next 10 years. International / value seems overpriced, but less-so. I (unhappily) hold some commodities and bond for hedging purposes. Any other ideas?


Your chart alone shows how silly trying to use PE can be. The highest PE ever was in 2009.... as the "E" fell through the floor. Was that a terrible time to buy stocks?

You're looking in the rear view mirror, with earnings expected to rise nearly 25% this year compared with last year.
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TwoIdenticalIndexes
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Re: Value strategies

Post by TwoIdenticalIndexes »

rascott wrote: Thu Apr 15, 2021 12:37 pm
TwoIdenticalIndexes wrote: Thu Apr 15, 2021 12:14 pm I'm back with the standard screed.

1. Asset values are completely ridiculous. Returns have been dragged forward to the detriment of early accumulators. If you think these values are remotely reasonable you are completely blind.
https://www.multpl.com/s-p-500-pe-ratio

2. What are your best strategies for obtaining reasonable buy and hold positions which are likely to have positive returns over the next 10 years. International / value seems overpriced, but less-so. I (unhappily) hold some commodities and bond for hedging purposes. Any other ideas?


Your chart alone shows how silly trying to use PE can be. The highest PE ever was in 2009.... as the "E" fell through the floor. Was that a terrible time to buy stocks?

You're looking in the rear view mirror, with earnings expected to rise nearly 25% this year compared with last year.
Increase earning 25% this year and you still have a P/E way, way above normal.
UpperNwGuy
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Re: Value strategies

Post by UpperNwGuy »

TwoIdenticalIndexes wrote: Thu Apr 15, 2021 12:14 pm I'm back with the standard screed.

1. Asset values are completely ridiculous. Returns have been dragged forward to the detriment of early accumulators. If you think these values are remotely reasonable you are completely blind.
https://www.multpl.com/s-p-500-pe-ratio

2. What are your best strategies for obtaining reasonable buy and hold positions which are likely to have positive returns over the next 10 years. International / value seems overpriced, but less-so. I (unhappily) hold some commodities and bond for hedging purposes. Any other ideas?
My IPS says (amongst other things):
1. Ignore valuations.
2. Invest in Total Stock.

You would not like my IPS if you think you can strategize your way through current market conditions.
Nathan Drake
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Re: Value strategies

Post by Nathan Drake »

Ocean77 wrote: Thu Apr 15, 2021 12:22 pm For this reason, I have not been adding money to my passive portfolio lately (which consists of US and international index funds). For my fun account, where I occasionally pick my own stocks, I could still find good companies globally that sell for a PE between 10 and 15 even now. That's where I put money these days.
Why no contributions to international? It’s not in the same boat as US wrt valuations
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
garlandwhizzer
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Re: Value strategies

Post by garlandwhizzer »

There is currently no sure shortcut to getting rich apart from the same standard methods that have always worked in the past given sufficient patience. Valuations are definitely stretched, absurd in some areas, but they have been stretched by historical standards for more than a decade. These overbought stocks have only gotten more and more expensive as the years went by. The question this raises is whether valuations are reliable predictors of future returns, and if so over what time frame.

In short because something like AMZN, TSLA, GME are at valuations that seem absurd by historical standards, does that mean they are destined to collapse? AMZN and TSLA have been massively overvalued for years even as they have continued to get more overvalued. AMZN was absurdly overvalued 13 years ago, so much so that I refused to buy it. Yet if I had invested 10K in it 13 years ago, it would now be worth 500K. So much for the predictive accuracy valuations. Likewise those who sold their holdings in S&P 500 years ago because of absurdly valued tech driven LCG dominance have so far regretted it. Has the market lost its mind?

Perhaps not. Humans who set market prices are not entirely rational beings and we should therefore not expect the market to be always rationally sensible.The thing that is distinctly different now than anytime in the past is the incredibly massive concentration in wealth in the US investing class. That has magnified emotionally driven investing IMO. So much money chases after what look like lousy investment opportunities that valuations get distorted especially in stocks with a compelling and innovative tech growth narratives. Much investing now especially among less seasoned investors is done in the play money arena (GME options, profitless IPOs skyrocketing, Reddit, Robinhood, etc.,). As a multi-decade seasoned investor it doesn't make sense to me but, having been burned before, I don't expect it to always make sense.

What to do? I personally believe that it's important to cover all bases with a big allocation to cap weight indexing even with all its flaws as well as to modestly overweight areas that are more attractive by traditional measures like value and INTL. In other words don't decide up front which horse is going to win the race. Instead own both in a proportion that suits your understanding.

That doesn't relieve us of the problem of low expected future returns but it believe it will likely reduce risk and volatility. Given the current massive inflated values of essentially all investment assets (SCV is no longer a screaming buy) I see no way to produce the robust returns that we've gotten used to over the last 4 decades. I believe that 4 decade period was a very fortunate aberration, not a standard we'll inevitably return to. I also believe the search for shortcuts is likely to be a worse approach than the above particularly in risk adjusted returns. Invest we must if we wish to grow our asset base. It's just that if we're starting our investment career now, the huge tailwind that has been inflating all investing asset prices into these stratospheric levels is likely to weaken going forward. Thees still so much money to invest that has to go somewhere and stocks are still likely to produce higher returns than anything else going forward IMO. I don't think that a bubble collapse like 2000-3 is going to happen because the most outrageously overvalued companies are now at least financially strong growing companies not just a pipe dream with a few exceptions. They are just likely to inflate in price less slowly going going forward than in the past.

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Re: Value strategies

Post by NYCPete »

TwoIdenticalIndexes wrote: Thu Apr 15, 2021 12:14 pm I'm back with the standard screed.

1. Asset values are completely ridiculous. Returns have been dragged forward to the detriment of early accumulators. If you think these values are remotely reasonable you are completely blind.
https://www.multpl.com/s-p-500-pe-ratio

2. What are your best strategies for obtaining reasonable buy and hold positions which are likely to have positive returns over the next 10 years. International / value seems overpriced, but less-so. I (unhappily) hold some commodities and bond for hedging purposes. Any other ideas?
1. If you're an early accumulator, it really doesn't matter whether valuations are reasonable. The vast majority of the growth of your savings is not coming from investment returns. It's coming from your contributions. You'll make a much bigger difference figuring out how you can save more than you will figuring out how to time the market based on valuations.

Your own savings rate will become less impactful when your accumulated savings is equal to more than 2x your annual gross income. That's about when the dollar growth from investment return will be larger than the dollar growth from your contributions.

2. The best strategy is to diversify asset classes and not view the S&P 500 as the only place to invest. Bonds, Int'l stock, small value stock, Int'l small or small value. EDIT to add: Also, stick with the tried and true plan: Buy, hold, and rebalance.

Best,
Peter
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha
hnd
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Re: Value strategies

Post by hnd »

I invest 10% in DFA Small cap value and plan to do so for the long haul.
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Ocean77
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Re: Value strategies

Post by Ocean77 »

Nathan Drake wrote: Thu Apr 15, 2021 1:15 pm
Ocean77 wrote: Thu Apr 15, 2021 12:22 pm For this reason, I have not been adding money to my passive portfolio lately (which consists of US and international index funds). For my fun account, where I occasionally pick my own stocks, I could still find good companies globally that sell for a PE between 10 and 15 even now. That's where I put money these days.
Why no contributions to international? It’s not in the same boat as US wrt valuations
I actually did and do add a bit to international, but only to bring it up to my target AA. I have more money to invest but I'm kind of reluctant to change the AA for my main account (i.e. increase international allocation) just because of what I think about relative valuations. International is already 50%.
30% US Stocks | 30% Int Stocks | 40% Bonds
TheoLeo
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Re: Value strategies

Post by TheoLeo »

It is best not to try to outsmart the market. I am learning this again and again. The stock and sector picking game is just way to complex to game it.

You may look at US valuations and say its exuberance. But US tech valuations may also be high because these are low risk investments. These are companies with a bright future and strong balance sheets. They may deserve high valuations because they are low risk investments, meaning they are almost guaranteed to hold or increase their values. In a low yield world, that is worth a lot and again should be reflected in the valuations. Why would you not want to invest in these companies? What has an obviously better risk/return ratio than a mix of Apple, Facebook, Alphabet, Microsoft? Cash? Bonds? Chinese bank stocks?
Nathan Drake
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Re: Value strategies

Post by Nathan Drake »

:dollar
TheoLeo wrote: Thu Apr 15, 2021 10:24 pm It is best not to try to outsmart the market. I am learning this again and again. The stock and sector picking game is just way to complex to game it.

You may look at US valuations and say its exuberance. But US tech valuations may also be high because these are low risk investments. These are companies with a bright future and strong balance sheets. They may deserve high valuations because they are low risk investments, meaning they are almost guaranteed to hold or increase their values. In a low yield world, that is worth a lot and again should be reflected in the valuations. Why would you not want to invest in these companies? What has an obviously better risk/return ratio than a mix of Apple, Facebook, Alphabet, Microsoft? Cash? Bonds? Chinese bank stocks?
Lower risk = lower expected returns.

That said, I do not believe in the idea that megacap tech is less risky than any other type of large cap company.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
Chip
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Re: Value strategies

Post by Chip »

Less than a year ago you said that your net worth was -140k and that you were very early in your career.

If you don't like stock market values then pay down debt. Trying to guess which segment of the market is going to perform well is a fool's errand.
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Re: Value strategies

Post by nedsaid »

garlandwhizzer wrote: Thu Apr 15, 2021 1:56 pm There is currently no sure shortcut to getting rich apart from the same standard methods that have always worked in the past given sufficient patience. Valuations are definitely stretched, absurd in some areas, but they have been stretched by historical standards for more than a decade. These overbought stocks have only gotten more and more expensive as the years went by. The question this raises is whether valuations are reliable predictors of future returns, and if so over what time frame.

Nedsaid: Definitely, both the economy and the markets have changed since 1984, when I started investing. Perhaps us old fogeys have been living in the past, I mean the internet was hardly a thing back in 1984. Shoot, the personal computer revolution was just starting and the internet revolution was next. Then came wireless and the smartphones. I still remember typing term papers on a typewriter.

The problem is trying to decide what is temporary because of investor enthusiasm. Are some of these things fads or have some things permanently changed? It is some of both but it is hard to know what is faddish and what is real.

The world is a changing and it is changing fast. It is hard to keep up with events. The pace of change is accelerating.


In short because something like AMZN, TSLA, GME are at valuations that seem absurd by historical standards, does that mean they are destined to collapse? AMZN and TSLA have been massively overvalued for years even as they have continued to get more overvalued. AMZN was absurdly overvalued 13 years ago, so much so that I refused to buy it. Yet if I had invested 10K in it 13 years ago, it would now be worth 500K. So much for the predictive accuracy valuations. Likewise those who sold their holdings in S&P 500 years ago because of absurdly valued tech driven LCG dominance have so far regretted it. Has the market lost its mind?

Nedsaid: For every Amazon.com there was also a Pets.com. There were survivors from the High Tech/Internet mania of the late 1990's and a relative few of the survivors have actually thrived. Lots of the survivors never recaptured their former glory. AOL is still around and so is Yahoo. Cisco Systems is still an important company but has not been a particularly good investment. Qualcomm is another important name, its stock performance in recent years likely hasn't blown the doors off their hinges. Lots of formerly must have names have been rather ordinary stocks since 2000. Microsoft was dead money for years until they hired a new CEO and saw a resurgence. Steve Ballmer was just so 'eighties, sort of like someone from the eighties looking back to the 'sixties to the Afro, bellbottoms, and psychedelic clothing. Like Wow Man. Sort of like teen idols adored by millions of screaming pre-teen girls one day and dumped the next day for the next pop idol. Picking winners even in the Tech area isn't easy.

Perhaps not. Humans who set market prices are not entirely rational beings and we should therefore not expect the market to be always rationally sensible. The thing that is distinctly different now than anytime in the past is the incredibly massive concentration in wealth in the US investing class. That has magnified emotionally driven investing IMO. So much money chases after what look like lousy investment opportunities that valuations get distorted especially in stocks with a compelling and innovative tech growth narratives. Much investing now especially among less seasoned investors is done in the play money arena (GME options, profitless IPOs skyrocketing, Reddit, Robinhood, etc.,). As a multi-decade seasoned investor it doesn't make sense to me but, having been burned before, I don't expect it to always make sense.

Nedsaid: We all like to think we are smart contrarians who zig while the market zags, wholly rational while the rest of the world goes crazy. It might be that "smart" really means scared and timid. Sometimes the crowd is right and contrarians wrong. Sometimes there is a logic behind what seems to be a mania, as I like to say a madness to their method. Investors were right about High Tech and the Internet back in early 2000, it is just that their enthusiasm was so high that it took 10-12 years for actual earnings to catch up with expectations. Hard to say how high is too high and how early is too early. I thought that I was bold, seizing opportunity wherever I could find it but still in the back of my mind were the memories of my grandparents and parents discussing the 1929 crash and the Great Depression. So I guess I really was Born to be Mild. Sort of a moderate and wishy, washy investor. Maybe what I needed was an occasional shot of adrenaline, a bit more excitement.

What to do? I personally believe that it's important to cover all bases with a big allocation to cap weight indexing even with all its flaws as well as to modestly overweight areas that are more attractive by traditional measures like value and INTL. In other words don't decide up front which horse is going to win the race. Instead own both in a proportion that suits your understanding.

Nedsaid: That is what I have tried to do. I have Value and Mid/Small Cap tilts in my portfolio. I have tried hard to increase my allocation to International Stocks but the US Market keeps zooming so I have hardly budged the needle as far as US Stock/International Stock allocation. Even my stock allocation relative to bonds and cash have crept up despite waves of mild rebalancing from stocks to bonds. The reality is that even my rebalancing has been cautious.

That doesn't relieve us of the problem of low expected future returns but it believe it will likely reduce risk and volatility. Given the current massive inflated values of essentially all investment assets (SCV is no longer a screaming buy) I see no way to produce the robust returns that we've gotten used to over the last 4 decades. I believe that 4 decade period was a very fortunate aberration, not a standard we'll inevitably return to. I also believe the search for shortcuts is likely to be a worse approach than the above particularly in risk adjusted returns. Invest we must if we wish to grow our asset base. It's just that if we're starting our investment career now, the huge tailwind that has been inflating all investing asset prices into these stratospheric levels is likely to weaken going forward. Thees still so much money to invest that has to go somewhere and stocks are still likely to produce higher returns than anything else going forward IMO. I don't think that a bubble collapse like 2000-3 is going to happen because the most outrageously overvalued companies are now at least financially strong growing companies not just a pipe dream with a few exceptions. They are just likely to inflate in price less slowly going going forward than in the past.

Nedsaid: I am still not at Scrooge McDuck status, being able to sit in a roomful of money and tossing handfuls of the stuff into the air in celebration. I still need portfolio growth and I will need to harvest capital gains in the future. I feel like I am hanging way out there at age 61 with about 63% of my portfolio in stocks. Haven't won the game yet and this is why all the fiscal and monetary stimulus and the inflated valuations of stocks and bonds makes me nervous. A replay of 1973-74 with a bear market and stagflation is the ultimate nightmare for a near retiree like me. It feels a bit like watching Jaws, that Great White Shark is swimming out there somewhere and I am still in the stock market waters.

Garland Whizzer
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diabelli
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Re: Value strategies

Post by diabelli »

My portfolio is in shambles because of all this talk. Anyone else so bad at staying the course that they change their AA on a whim after reading some newspaper article, speaking with a friend or taking a long thoughtful walk, several times per year -- such that the result has been big chunks of SCV funds, LCV funds, SP500, Total market, Total INT, EM (just a bit) in proportions which they haven't bothered to even quantify or track?

I'll settle on 100% total market, decide that the world has gone mad and change to virtually all SCV + LCV, then worry about a 30-year-Winter for value and change back to total market, then read something extolling the virtues of low P/E ratios overseas and change to 60% INT.

All I Can say good for myself is that I've never sold anything - selling during market drops doesn't seem to be part of my poor discipline.
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TwoIdenticalIndexes
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Re: Value strategies

Post by TwoIdenticalIndexes »

Chip wrote: Fri Apr 16, 2021 5:10 am Less than a year ago you said that your net worth was -140k and that you were very early in your career.

If you don't like stock market values then pay down debt. Trying to guess which segment of the market is going to perform well is a fool's errand.
I don't know where you are getting this information. The NW figure is not even directionally accurate. Regardless, like everyone here, my net worth is expanding to ridiculous degrees because the S&P is up 50% in the last year. Somehow I doubt that this will continue.
Chip
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Re: Value strategies

Post by Chip »

TwoIdenticalIndexes wrote: Fri Apr 16, 2021 1:33 pm
Chip wrote: Fri Apr 16, 2021 5:10 am Less than a year ago you said that your net worth was -140k and that you were very early in your career.

If you don't like stock market values then pay down debt. Trying to guess which segment of the market is going to perform well is a fool's errand.
I don't know where you are getting this information. The NW figure is not even directionally accurate. Regardless, like everyone here, my net worth is expanding to ridiculous degrees because the S&P is up 50% in the last year. Somehow I doubt that this will continue.
From this post:
TwoIdenticalIndexes wrote: Tue Jun 16, 2020 3:23 pm I currently have >$50K in available credit, and have no need of >90% of that. I could also easily expand this, as I really haven't tried to get access to credit at all. If I get 2 more cards and ask to raise the limits on them all, I bet I could surpass $100k. Compare this to my net worth of ~$140k and the fact that I am very early in my career.
secondopinion
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Re: Value strategies

Post by secondopinion »

Nathan Drake wrote: Fri Apr 16, 2021 1:22 am Lower risk = lower expected returns.

That said, I do not believe in the idea that megacap tech is less risky than any other type of large cap company.
Right. When anything has high returns, it cannot do this by being less risky. Remember that growth companies gain more by meeting expectations than value companies do; this is because the expectations are set higher for growth companies. As long as meeting those expectations is stable for both sides, growth will beat value. When a growth company turns value (i.e. they no longer have major growth expectations), they will lose a lot of their worth. The result is clear; these growth companies can be risky even if the company is deemed safe (in the sense of their company quality).

Growth expectations are a major reason growth companies are expensive "metrically"; it adds to their risk as the market has already determined they could be high return.

Quality does drive up the stock price as well; it is natural risk-return that dictates that. For example, if a stock was deemed "BBB" quality and now is deemed "AA" quality (by the company soundness, not stock performance), then it is only natural that the price will increase (stock growth expectations may change the net result, but quality is part of the price). This is precisely what some value investors are trying to do: buy the cheap unsound companies (like the "CCC"s) and sell when they become sound ("BBB" or even "AA"); "value traps" abound, and they are "value" because they are unsound. High quality companies are likely to stay high quality, but they can falter (and thus their stock price drops). But like high-quality bonds, the high quality are more likely to stay that way; and vice versa for the low quality.

So, quality is another reason for expensive companies; it suppresses possible returns since the market has already deemed them safer.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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retired@50
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Re: Value strategies

Post by retired@50 »

Chip wrote: Fri Apr 16, 2021 4:02 pm
TwoIdenticalIndexes wrote: Fri Apr 16, 2021 1:33 pm
Chip wrote: Fri Apr 16, 2021 5:10 am Less than a year ago you said that your net worth was -140k and that you were very early in your career.

If you don't like stock market values then pay down debt. Trying to guess which segment of the market is going to perform well is a fool's errand.
I don't know where you are getting this information. The NW figure is not even directionally accurate. Regardless, like everyone here, my net worth is expanding to ridiculous degrees because the S&P is up 50% in the last year. Somehow I doubt that this will continue.
From this post:
TwoIdenticalIndexes wrote: Tue Jun 16, 2020 3:23 pm I currently have >$50K in available credit, and have no need of >90% of that. I could also easily expand this, as I really haven't tried to get access to credit at all. If I get 2 more cards and ask to raise the limits on them all, I bet I could surpass $100k. Compare this to my net worth of ~$140k and the fact that I am very early in my career.
Chip,
I think the squiggly character (tilde) in front of the $140k is supposed to indicate an approximate number, not a negative number.

OP,
You don't really get to pick what the stock market does while you happen to be alive and have an interest in investing. I'm sure others have complained about the market at various points throughout history, but again, you're powerless to change the times in which you live. You can either choose to invest, or not.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Hannibal Barca
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Re: Value strategies

Post by Hannibal Barca »

I wouldn't completely deviate from your normal asset allocations, but it's probably OK to tilt your portfolio mix a little towards asset classes you think are cheaper. Ideally you achieve this tilt through tax advantaged accounts to avoid tax events.

I'm a big believer in mean reversion. The US equities have had a great run for the last decade relative to international equities, but now look relatively expensive when you look at CAPE and some other measures. I've tactically tilted my portfolio accordingly. I've missed out on some great S&P 500 gains in the last month or two as a result, but I'd say it will take at least a few years to see if this was the right move. Within international, I think Europe and emerging markets are the most interesting right now. Absolutely nothing is cheap, but they appear "cheaper."
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mokaThought
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Re: Value strategies

Post by mokaThought »

TwoIdenticalIndexes wrote: Thu Apr 15, 2021 12:14 pm I'm back with the standard screed.

1. Asset values are completely ridiculous. Returns have been dragged forward to the detriment of early accumulators. If you think these values are remotely reasonable you are completely blind.
https://www.multpl.com/s-p-500-pe-ratio

2. What are your best strategies for obtaining reasonable buy and hold positions which are likely to have positive returns over the next 10 years. International / value seems overpriced, but less-so. I (unhappily) hold some commodities and bond for hedging purposes. Any other ideas?
I recently adopted an adaptation of Paul Merriman's model for this. The basic four asset classes by his model are large blend, large value, small blend, and small value. Split that out between U.S. and international for eight. He then adds REIT and emerging markets to make ten. With a 50/50 U.S./international split, that's 10% in each class.

Based on this and his ETF recommendations (https://paulmerriman.com/best-in-class- ... hold-2021/), I constructed the following:

15% large blend: AVUS
15% large value: RPV
15% small blend: IJR
15% small blend: AVUV
8% int'l large blend: AVDE
8% int'l large value: EFV
8% int'l small blend: FNDC
8% int'l small value: AVDV
8% emerging markets: EMXC/FRDM

By no means do you have to go this far, but you could tilt to a lesser degree with fewer funds.
"October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February."
Chip
Posts: 3994
Joined: Wed Feb 21, 2007 3:57 am

Re: Value strategies

Post by Chip »

retired@50 wrote: Fri Apr 16, 2021 5:54 pm Chip,
I think the squiggly character (tilde) in front of the $140k is supposed to indicate an approximate number, not a negative number.
Thanks! The font was small enough on my screen that the squiggle wasn't really visible. It looked like a minus sign. OP, my apologies.
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