Corporate Earnings

  • 08 Aug
    Are Stocks & Bonds In A Bubble? Sven Thinks So…

    Are Stocks & Bonds In A Bubble? Sven Thinks So…

    • Earnings have been growing in the last 12 months, but haven’t grown that much over the last 20 years.
    • Even the Swiss central bank owns almost $3 billion worth of Apple’s stock.
    • After the dot-com and the housing bubbles, school books will talk about the central bank bubble in the future.

    Introduction

    All we see right now is the stock market continuing to go up. The S&P 500 is already up 9.7% year to date, and there is no sign that the trend might weaken or reverse. Over the last 8 and a half years, the index is up 242%. More →

  • 24 Jul
    It’s Feeling A Lot Like 2007 – Are You Prepared For The Next Crash?

    It’s Feeling A Lot Like 2007 – Are You Prepared For The Next Crash?

    • There’s nothing to worry about. Everything looks exactly the same as it did in July 2007 when no one was worried because the S&P 500 was breaking new highs.
    • Even the statements from the FED’s 2007 chair and the chair of it today look alike.
    • This doesn’t mean there will be a crisis in 2018, but it sure means you have to be prepared for anything.

    Introduction

    Last week I published an article describing how strong the trend is that is pushing the S&P 500 higher. There is plenty of liquidity, corporations are doing big buybacks, and most investors are putting their money into passively managed investment vehicles. More →

  • 26 May
    Corporate America’s Focus Isn’t On Shareholder Value Creation

    Corporate America’s Focus Isn’t On Shareholder Value Creation

    • Earnings haven’t grown in the last 10 years. What is corporate management doing?
    • A temporarily higher stock price isn’t good for the majority of investors, especially those investing for the long term and retirement.
    • Buybacks are idiotic, management pays $ 3million for a home they can build for $1 million.
    • There is only one company that does smart buybacks.

    Introduction

    There’s a huge problem affecting corporate America that nobody is seeing because most people think in positives and negatives, and can’t think on an relative scale. What do I mean by this? Well, when shareholders judge management, they look at whether the bottom line is positive and in line with what the competition is doing. Nobody is assessing whether it could have been much better.

    We expect only the best from our favorite athletes and we hope our children develop to their full potential but when it comes to corporate management, we remain mostly silent and accept whatever they throw at us. More →

  • 16 May
    When CEOs Become Delusional: The Case of Unilever’s Polman

    When CEOs Become Delusional: The Case of Unilever’s Polman

    • Unilever CEO Polman declared himself more competent than Buffet just because Unilever has outperformed Berkshire in the last 8 years. The funny thing is, Unilever outperformed thanks to Buffett.
    • Not only that, but Berkshire outperformed Unilever on revenue and earnings while at equal valuations, Berkshire would also largely outperform.
    • The 8-year bull market has clearly gotten into some CEOs’ heads. This creates a very dangerous situation for long term shareholder value creation.

    Introduction

    In an interview with Jim Cramer, I was thunderstruck to hear Unilever’s CEO (NYSE: UL), Paul Polman, tell the world that his returns have been better in the last 8 years than Buffett’s Berkshire Hathaway (NYSE: BRK.A, BRK.B). More →

  • 05 May
    The Market Is Dumb And Getting Dumber

    The Market Is Dumb And Getting Dumber

    • The number of analysts is declining, stocks don’t react to earnings nor news anymore, and the underlying economic environment is rigged.
    • However, as investors, we have to always look at risk and reward as there is always a way to profit.
    • Protecting yourself from market ignorance doesn’t even cost much.

    Introduction

    I would define a dumb investor as one who doesn’t think about risk in relation to reward, and therefore I fearlessly say: the majority of investors are behaving in a pretty dumb way.

    This is a heavy statement, especially considering markets have performed nothing short of spectacularly in the last 8 years. As evidence, the S&P 500 is up three-fold since 2009 and continues to strongly march ahead. More →

  • 23 Mar
    Do You Have A Static Or Dynamic View Of The Markets?

    Do You Have A Static Or Dynamic View Of The Markets?

    • A static view tells us stocks are cheap. A dynamic view tells us hell is about to break loose.
    • Vehicle loans have increased 57% since 2010. If interest rates increase, car sales and other credit related sales will falter and lead the economy into a recession.
    • However, as always, there are ways to make money in any environment. Today we’ll discuss an actionable idea and introduce you to a profitable long term investing philosophy.

    Introduction

    This market has lost all connections to economic reality.

    The FED’s rate hike lowered treasury yields instead of pushing them higher. This is at odds with history as since 1954, the correlation between the federal funds rate and the yield on 10-year treasuries has been nearly perfectly correlated with a correlation ratio of 0.91, 1 being perfectly correlated. More →

  • 08 Feb
    Dow 60,000 In The Next 10 Years?!?

    Dow 60,000 In The Next 10 Years?!?

    • Earnings estimations tell us that the S&P 500 will reach 6,471 and the Dow 59,000 points in 10 years.
    • A bad case scenario with current earnings growth would see the S&P 500 at 3,589 points while the Dow, which just passed 20,000 points, would be at 31,415 points.
    • We’ll compare a short-term and a long-term perspective on earnings.
    • Only two times in history have valuations grown alongside earnings, and the results are extremely indicative.

    Introduction

    Earnings are the oxygen of our investments. Therefore, it’s extremely important to keep an eye on what is going on.

    A short-term and long-term perspective on recent earnings reports is going to tell us how to position ourselves for 2017 and beyond. More →

  • 15 Dec
    This Could Push The S&P Even Higher

    This Could Push The S&P Even Higher

    • The market looks overvalued but there are three main factors that could push it even higher.
    • A repatriation tax holiday could make $2.1 trillion available for dividends, buybacks, and M&As.
    • Economic growth and inflation could push earnings higher, further inflating stock prices.

    Introduction

    It seems that everyone agrees on the fact that this market is overvalued and borderline irrational. However, there is no correction in sight and the only question to be asked is “how high can this market go?”

    The S&P 500 has jumped 5.4% since Trump won the elections, and is 12.1% higher year-to-date. By adding in the 2% dividend yield, we arrive at an excellent 14% return for 2016. This year’s positive return will make it number eight in a row for the S&P 500 as it has been rewarding investors since 2009. More →

  • 09 Nov
    The Economics Are Great, But Valuations Point Toward Stock Picking To Limit Risk

    The Economics Are Great, But Valuations Point Toward Stock Picking To Limit Risk

    • GDP, productivity and earnings are growing which is great news.
    • However, valuations are high and interest rates are likely to rise soon.
    • Given the variations in revenue and earnings growth, and the upcoming changes in interest rates, now may be the time to switch from index investing to stock picking.

    Introduction

    As the earnings season is almost over—and GDP, productivity and labor data is in—it’s a good time to look at what kind of conclusions can be made out of the multitude of information. By putting the noise aside (the election) and focusing on news that impacts future earnings, we’ll relate recent developments to the potential risks and rewards for your portfolio. More →

  • 08 Nov
    It May Be Time To Switch From Discretionary To Staples

    It May Be Time To Switch From Discretionary To Staples

    • Consumer staples and discretionary stocks have similar valuations, but rising consumer debt suggests rebalancing towards staples is less risky.
    • Staples have better earnings to revenue growth which indicates higher competitiveness and M&A activity in the discretionary sector.
    • In the case of an economic pullback, discretionary stocks would be hit harder as M&A activity will prove too expensive at valuations above 24.

    Introduction

    With most of the earnings in and the S&P 500 down in the last two weeks, it’s good to take a look at the consumer goods sector to find potential defensive investments. The iShares Consumer Goods ETF (NYSEARCA: IYK) has enjoyed a wonderful run in the past 7 years. More →

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