Calculator Predicts Poor Long-Term Stock Returns Due to Stock Valuation Effect
Purcellville, VA (PRWEB) July 5, 2006
The S&P stock index is likely to provide a real return of less than 3 percent over the next 20 years. So reports a new calculator that employs regression analysis on historical stock-return data going back to 1870.
“Investors have been misled by reports on what the historical data says that ignore the effect of changes in stock valuation,” said Rob Bennett, co-author of the new calculator. “Today’s stock valuation level is not at all typical, and it is not realistic to expect stocks to generate typical returns again until stocks are again being sold at reasonable prices.”
Bennett is founder of the Financial Freedom Community (a group of internet discussion boards). He co-authored The Stock-Return Predictor calculator with John Walter Russell and is the creator of the Valuation-Informed Indexing approach to investing. Russell has been engaged for over four years in breakthrough research on the effect of changes in stock valuation levels on long-term stock returns.
The new investing calculator is available free of charge at web sites run by Bennett and Russell. The calculator page at Bennett’s site is — http://www.passionsaving.com/stock-valuation.html. The calculator page at Russell’s site is — http://www.early-retirement-planning-insights.com/stock-return-predictor.html.
The historical stock-return data shows the most-likely 30-year real return for purchases of the S&P index made today to be 5.3 percent (with a range of possibilities stretching from 3.4 percent to 7.4 percent). The outlook is considerably darker for the more immediate future, however. The calculator reports a most-likely 10-year return of 1.3 percent (with a range of possibilities stretching from a negative 4.7 percent to a positive 7.3 percent). For 20 years, the most likely return is 2.7 percent (with a range of possibilities stretching from a negative 1.3 percent to a positive 6.7 percent).
Robert Shiller, John Bogle, Warren Buffett, William Bernstein and other stock investing experts have often warned investors that it is not reasonable to expect the sorts of returns that fueled the bull market of the 1980s and 1990s now that valuations have reached such high levels. Until publication of the calculator, though, stock investors have not had a means of quantifying the valuation effect and of thereby putting advice to be wary of the effect of valuation changes to significant practical use.
Rob Bennett writes the daily “Financial Freedom Blog” and is the author of “Passion Saving: The Path to Plentiful Free Time and Soul-Satisfying Work.” His next book, “Investing for Humans: How to Get What Works on Paper to Work in Real Life,” is slated for publication in 2008.
Don’t Get Out of the Stock Markets Says New Book: “42 Rules for Sensible Investing”
Cupertino, CA (PRWEB) January 22, 2009
In his new book, “42 Rules for Sensible Investing,” Leon Shirman will tell you not to get out of the stock market – even in today’s economy. With practical insights Shirman helps you develop a personal investment strategy for picking winning stocks. Strategies in the book are based on studying investing legends such as Benjamin Graham, Warren Buffett and Peter Lynch. The book includes a checklist of concise, practical, and sensible rules that are indispensable for investing during a recession.
In “42 Rules for Sensible Investing,” learn investing principles to evaluate an investment portfolio and immediately implement changes if necessary. Some rules are common sense advice. Some are more common knowledge, and some could definitely cause controversy:
Why index funds perform better than most other actively managed funds
How diversification can sometimes be a bad idea
Why long term, investing in stocks is less risky than in bonds or bills
Why it makes sense to stay invested at all times
How simple process of stock picking is better than a complex one
“We are in bear market territory. The market may continue to go down, but it may also turn up tomorrow. No one knows for sure. I believe that it is prudent to stay the course rather than tempt fate by jumping in and out,” Shirman said.
Bryan Koffman, General Partner, PanTerra Investments says this book contains, “Valuable and actionable advice for both novice and experienced investors delivered in an enjoyable and easy to read manner.”
Leon Shirman earned a Ph.D. in Applied Mathematics from U.C. Berkeley in 1990. He has worked for a number of high tech companies, but turned his interest to investment management. He is now the Managing Partner of Etalon Investments, a fund that he started in 2002.
Title: 42 Rules of Sensible Investing
Subtitle: A Practical, Entertaining and Educational Guidebook for Personal Investment Strategies
Authors: Leon Shirman
Date of Publication: December 17, 2008
Price: Paperback $ 19.95, eBook $ 11.95
ISBN: Paperback: 978-1-60773-008-8 (1-60773-008-1)
ISBN: eBook: 978-1-60773-009-5 (1-60773-009-X)
LIBRARY OF CONGRESS CONTROL NUMBER: 2008940963
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Most economic analysis hasn’t been accurate over the last several years, and it’s partially due to the severity of the financial crisis, which almost brought about the complete collapse of the stock market. While history is replete with all kinds of recessions (some more severe than others), memories are short on Wall Street, because that’s what most people are doing there—working for short-term gains.
Imagine if you were a Warren Buffett type of investor; you’ve already made enough money to live comfortably and you’re running a large investment portfolio, the purpose of which is to invest in businesses at good prices for the long term. Your holdings would reflect the general state of the economy, but you would relish the opportunity to buy more companies when prices retreat. That’s your business—to invest in good businesses and good managers. The returns are the returns. They can’t be predicted and that’s why the entry price is so important.
Big investors like Buffett and hedge-fund managers like George Soros invest a lot of money in a lot of different types of securities. They also trade around their positions as market conditions warrant. Soros has been selling gold recently, but still has a very large net long position. My favorite investment analyst, Jim Rogers, makes big, calculated investments based on a theme or trend, and then trades around the position as market valuations change. Before Rogers makes a big investment, however, he waits for the marketplace to achieve extremes in prices. In the absence of market extremes, he just waits. That’s how you have to be as an investor—patient and flexible.
We know we’re in a period of slow economic growth. We know the economy is sputtering, as are employment and the housing market. These are all structural issues that take a good deal of time to correct in the business cycle. So, from my perspective, it’s a hurry-up-and-wait kind of market.
Predicting the stock market is an irrelevant endeavor. Predicting earnings and cash flow from a business—now that’s a different story. I think we’re likely to see share prices continue to drift until second-quarter earnings season begins. Once again, the market will expect its numbers to be met and, more importantly, it will want to see improved corporate visibility for a stock to go up in price.
Predictions are just guesswork, but expectations for returns from stocks are currently being driven down. This makes the near-term outlook weak. But, it also makes outperformance later that much easier. Barring any major new shocks to the system, the market is setting itself up for an earnings rally at some point within the next nine months. That, by the way, is just a guess.
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Value stock investing drives our stock investment at Tactical Trading Academy. We abide by our disciplined value investment philosophy and process.
From the universe of thousands of equity securities, we generates investment ideas through our proprietary strategy. If a security appears attractive, detailed quantitative and qualitative research follows.
Using our proprietary strategy we have been able to generate consistent profits in our stock investment. We specialise in stocks listed in Singapore and United States of America.
Our return objective is to double our subscribers’ money every four years. We eat our own cooking – we had invested our own money in the stocks that we recommend.
We had identified an unloved stock with huge upside potential. Name of the stock is call Strayer Education Inc.
Strayer Education, Inc. is a post-secondary education services corporation. The Company offers a range of academic programs through its wholly owned subsidiary Strayer University, Inc. (the University), both in classroom courses and online via the Internet.
Strayer University is an institution of higher learning that offers undergraduate and graduate degree programs in business administration, accounting, information technology, education, health care, public administration and criminal justice at 78 physical campuses in Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, New Jersey, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, and Washington, D.C.
As of December 31, 2009, the Company had more than 54,000 students enrolled in its programs. The Company has also developed a robust online education program. (Company information from Google Finance).
1. Support level had formed for Strayer Education Inc at 0.
2. Strong insiders buying by the directors signal time to buy.
3. Company has very consistent growth in revenues and earnings for the past 16 years.
4. Brend Valuation Model shows that intrinsic value of Strayer Education is 5.20.
If you want to learn how to calculate the intrinsic value of a stock using Brend Valuation Model, send email to firstname.lastname@example.org.
Market Strategist Tactical Trading Academy Website: http://TradingEducationProgram.org/ Email: email@example.com
“The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price.” – Warren Buffett
Tactical Trading Academy is run by professionals who used to work as investment managers in hedge funds.
Now we specialise in teaching people how to trade the Forex and Stock market for long term financial success. We are currency traders, investors, educators and success coaches to many forex traders and stock investors.
To read more about our Forex Education Program, click here.
To find out more about our Stock Investing Program, click here.
If you have any questions or feedback, you can email us at firstname.lastname@example.org and we’ll get back to you as soon as we can.
www.stockmarketinvesting101.com Understanding financial statements can be rather complex if you do not have much accounting knowledge. What are annual reports? What are Balance Sheets? What are Cashflow statements? Before investing in any company, you need to have your own analysis of financial statements. Do you understand what the numbers are telling you? Video Rating: 5 / 5
Is Capstone Turbine a Buffett Stock?
Let’s find out. Read more on The Motley Fool
Buffett lunch tops record bid
OMAHA, Neb. #8212; An anonymous bidder agreed Friday to pay more than $ 2.6 million for a lunch with billionaire investor Warren Buffett, offering a final amount after the auction closed that topped last year’s record-setting bid for the most expensive charity item ever sold on eBay. Read more on Fort Wayne News-Sentinel
1. A mind free shares: shares a lot of people handle every day, every day would like to share, do post every day, and I found that Buffett’s approach is completely different: do not look to see the company stock, do not want the price to value, not to make speculative investments . With many people’s eyes compared to only stock prices, Buffett did not stock, but as investment shares into business as a real investment: “You do not buy the stock, but the company.”Stock Market Today – Stock Quotes | Market Watch | Financial News http://www.stockmarkettoday.cc/
2. Safety First: Many people ask for money to life, in order to make money rather the huge investment, Buffett has stressed safety first, money second, losing money may be small, the possibility of large profits only when the shot. Buffett said: “The margin of safety is the cornerstone of investment success.” The margin of safety often appear in the stock market crash, good company when the stock price plunged. Most people like to chase sell, Warren Buffett on the contrary, abandoned as I get, people take me for.
3. Stock picking as election Wife: A lot of people picking is very frivolous, frequent conversion, Buffett irony for the stock market, “one-night stand”, he was selected stock picking as his wife: “We are looking for investment targets in the attitude and look for life partner exactly the same attitude. “I be summarized in three points: the attitude of caution and strict standards, very little amount.
4. To know ourselves: to know ourselves and be victorious. Warren Buffett minimal loss of stock selection, one important reason is that he only vote for those who own very familiar, very familiar, very sure of outstanding shares. He repeatedly stressed that the first principle of investment is the ability to circle principle: “capacity ring size is not important, the ability to know their boundaries is critical circle.” I’m picking it summed up three major precepts: can not choose, unfamiliar not vote, do not understand not vote.
5. First-class business: Buffett said: “We insist on looking for business-class company.” While ordinary investors to determine whether the business class is the simplest and most effective way to grasp the core of the key points: the brand. Best reflects the core business is first class brand, and first-class brand must have three elements: the famous, old, big.Stock Market Today – Stock Quotes | Market Watch | Financial News http://www.stockmarkettoday.cc/
6. Top management: Warren Buffett’s company to find not only a first-class business, but also have first-class management. He told us: “the acquisition of companies and buy shares, we want to buy the target company not only good business, but also have extraordinary outstanding, smart and capable, the subject of the beloved manager.” Buffett is often just like the company’s managers bought the company’s stock. I will be required for managers Buffett summed up as both ability and integrity, especially in demanding ethical, honest, sincere, loyal, in fact, is what we often say “Three Masters”: telling the truth, do practical things the old , so honest.
7. First-class performance: Warren Buffett said: “I just like those proved to have the continued profitability of the enterprise.” Promote long-term stock price continued to rise, and eventually only one force: profitable growth. I found that drive prices in the process of performance and the launch vehicle to promote the satellite into space, the process is very similar. As a listed company’s share price satellite launch vehicle to promote its profitability like, but also can be divided into three levels, first level is the gross profit, net profit of the second level is the third level is retained earnings. Buffett’s first-class performance required to meet three criteria: high-margin, high ROE, high retained earnings stock conversion.
8. Value Assessment: Warren Buffett has a famous saying: “You pay the price, but you get value.” Key to value investing is what you get is far greater than the value of the price you pay. The biggest difficulty is that value investing, the price is clear, but the value is very clear, only about the assessment themselves. The main valuation methods are generally based on three areas: asset value, profitability, cash flow. Buffett believes that free cash flow for valuation according to the most correct way.
9. Focus on investment: a very popular investment approach is to spread investments, do not put your eggs in one basket, but buy a lot of stocks, each stock to buy only a little, this seems more robust, making money is even greater. Buffett opposes diversification, advocates focus on investment: “Do not put all your eggs in one basket, this approach is wrong, the investment should be like Mark Twain suggested, put all your eggs in one basket years, and then watch that basket. “” Our investment concentrated in only a few outstanding companies who, we are focused investors. “I think it is similar to Buffett’s investment principles focus on the military principle of concentration of forces, popular that is to bet big to win big, but it requires three conditions: win big need great wisdom, great gambling need to Dayong, Dacheng need a big bear.http://www.stockmarkettoday.cc/best-10-tips-for-stock-investment.html
10. Long-term investment: Warren Buffett joked that his head with the butt earn money more than, in fact, better than anyone else because he could get is maintained: “My favorite time of holding a stock is: never . “long-held, easy to say, it is hard. Buffett was able to sum up my long-held stock is years or even decades is the secret of three heart: the determination not to sell dead; confidence, not to sell more profitable; perseverance, ups and downs do not sell. But need to note is that Buffett does not sell long-held and has been only a very small number of stocks, Buffett will also hold a lot of stock after a few years time to sell.
PeterSchiffBlog.com – Invest like this yourself by reading the book – http Warren Buffett and Charlie Munger are two of the greatest investors of all time. Thousands of people go to Omaha every year just to hear a few minutes of their investment advice. What is most interesting is that their advice typically goes against the “mainstream”. The mainstream would like you to think that successful investing is an extremely complicated matter that requires the understanding of complex mathematical formulas. However, this is NOT the way that Buffett made his billions. Video Rating: 5 / 5
It’s time to get out of the stock market, analyst says
Charles Ortel is a managing director of research firm Newport Value Partners. Previously he was a managing director of Dillon Read, followed by stints at The Bridgeford Group and The Chart Group. This is Part 1 of the interview. Part 2 will be published May 2. Read more on Journal Inquirer
Live From Omaha: The Berkshire Hathaway Annual Meeting
Join Fool advisors and analysts as we live-blog from the annual “Woodstock for Capitalists.” Read more on The Motley Fool
Many Questions Surround Sokol’s Downfall
David L. Sokol was treated like a rock star at last year’s annual meeting of Berkshire Hathaway, the conglomerate run by Warren E. Buffett. Shareholders lined up for autographs and snapshots of the executive considered by many to be Buffett’s successor. Read more on The Lakeland Ledger
The timing isn’t quite right yet, but, in the not-too-distant future, there should be a reacceleration of U.S.-listed Chinese stocks. If you’ve been a speculator in these stocks, you’ll know that it’s been tough going. The entire group has been suffering from a lack of investor confidence and a lot of this sentiment is warranted. There remain, however, many very good companies out there whose stock prices have fallen along with the group and that are now excellent values in my view. I think we’re very close to achieving extreme pricing (on the downside) with many of these stocks and speculators should be putting a number of these stocks on their radar screens.
If you watch the stock market long enough, you’ll know that certain sectors experience waves of enthusiasm from investors. It’s like the latest trend in the fashion industry, only the business cycle in stocks changes extremely fast. One year, the darling of the market is solar energy stocks. The next year, silver stocks are soaring. The whole system in my view is about perpetual rolling interest from investors on the Street and getting ahead of these trends is the single most important contributor to making big money in the stock market. It’s not even about owning the right individual stocks at the right time; it’s about owning the right sector. Share prices move in groups and Wall Street takes no prisoners. The stock market isn’t a perfect system and valuations are always relative, but with so many participants on the long and short sides of the marketplace, prices are never true for long.
Stock picking has always been and always will be a difficult endeavor to get right on a consistent basis. Even in a bull market, it’s difficult to make money as a speculator, because sentiment changes so quickly and so do stock prices. One unfulfilled expectation and a stock’s price can be cut in half—in a matter of minutes! If stock picking were easy, there would be a lot more retired stock traders living on your street. Even Wall Street pros don’t last in the game for very long. Most investment banks make a lot more money selling you advice than trading stocks for themselves.
The one thing I’ve learned over the years is never to fight the market. The action is the action. It might not be rational; it might not even be fair. But the stock market is a system that is based on fear and greed, and emotions have more to do with prices than anything else. A big investor like Warren Buffett worries almost solely about valuation, because he is buying an entire company’s cash flow, not just a share. For equity investors (speculators more appropriately), a stock’s valuation is more about perception than anything. Understanding the market’s prevailing psychology usually wins out over the most stringent of analyses.
Right now, there are several sectors in the equity universe that are not participating in the current rally. If you’re a buy-low/sell-high kind of speculator, now is the time to be looking seriously. Here’s what my favorite stock picker likes to do (Jim Rogers); he waits for securities to achieve price extremes, then he makes his bets. Retire on This One Hot Stock!
This stock is up 232% since we first picked it. Our expert analysts say it will go up another 100% in the next 12 months! Our top 19 stock picks were up an average of 173.57% in 2010 (not a misprint). See where we are making money in 2011 and get our combined 100 years of investing experience working for you starting today. Get your FREE report on our top stock pick immediately here.
Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits.