Problems with CAPE – Part ll
Investors are reading CAPE all wrong.
Author: Rodney Smith
Problems with CAPE – Part l
A CAPE ratio of 26.91 does not prove the stock market is overpriced. The stock market today may be overpriced or underpriced. CAPE using a historic average as a benchmark just doesn’t tell us one way or another
Financial strength – the debt equity ratio has serious shortcomings
No company under consideration will even be close to scrambling to pay its creditors.
How to identify great companies to invest in – Part lll
There needs to be a skilled knight in the castle to protect and enhance the moat.
How to identify great companies to invest in – Part ll
Some companies are in the seemingly fortunate position that they can maintain profit margins simply by raising prices.
How to identify great companies to invest in – Part l
Buffett uses Owner Earnings to judge the performance of a company and its management. He also uses Owner Earnings to assess the intrinsic value of a company.
Keeping your head in times of turmoil
Doing what everybody else is doing at the moment, and therefore what you have an almost irresistible urge to do, is often the wrong thing to do at all
The great investors and extreme volatility
Be prepared financially and psychologically to live through a series of bull markets and bear markets because in the long run common stock will pay off enormously and the next bull market will carry prices far higher than this one
What is the right price earnings ratio?
Price earnings ratios are a frail and shifting basis for determining fair value. They do not force investors to think through all the factors that go into a deep assessment of fair value.
The conventional view of market efficiency is badly mistaken
Prices in the stock market are never a reliable guide to the fair value of a stock.