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The Enduring Appeal of Tobacco Stocks

by: Lawrence Hamtil  on Tuesday, April 24, 2018

Tobacco stocks currently find themselves in a steep drawdown, with industry titans Altria Group and Philip Morris International currently down about 30% and 34%, respectively, from their all-time highs.  A rise in bond yields, - which lessens the appeal of tobacco stocks' hefty dividend yields, - increased regulatory concerns, and disappointing financial performance have combined to push the stocks to their worst performance in more than a decade: Read More

Equal-weighting the S&P 500 vs the S&P 400

by: Lawrence Hamtil  on Tuesday, April 10, 2018

Recently, S&P Dow Jones published a great article titled "Outperformance in Equal-Weight Indices," which goes into great detail about what drives the excess performance of the S&P 500 Equal-Weighted index versus its capitalization-weighted parent index.  According to S&P Dow Jones, a main driver of excess outperformance is greater exposure to big winners in equally-weighted portfolio (via SPDJ): Read More

Understanding Dividends

by: Lawrence Hamtil  on Tuesday, April 03, 2018

Except perhaps for stock buybacks, there is no area of investing that suffers from as much misinformation and misunderstanding as dividends.  Whether fed by institutional advertisements using them as a marketing ploy, or perhaps because investors perceive them as tangible wealth in an otherwise uncertain investment world, investors have become infatuated with dividends.  Unfortunately, very few investors seem to understand dividends, both in terms of what they represent to stock owners, and in terms of their investment utility to a portfolio. Read More

Oil's Evolving Role in the Dow Transports

by: Lawrence Hamtil  on Sunday, March 18, 2018

Developed by Charles Dow over one hundred years ago, Dow Theory is one of the oldest forms of market analysis, and is still in widespread use by market strategists.  Dow Theory is the essence of simplicity; for a market move to be confirmed, both the Dow Jones Industrial Average (or DJIA), and the Dow Jones Transportation Average (DJTA) have to follow one another either to the upside or the downside.  The logic behind it is that since the equity markets track the fortunes of the broader economy, both the stocks of companies that manufacture goods and the stocks of companies that ship them should move in lockstep.   Read More

Capex Darlings and the Myth of Long-Termism

by: Lawrence Hamtil  on Tuesday, March 13, 2018

The buyback vs investment debate is back this week, spurred by a column by Bloomberg columnist Barry Ritholtz, who cites General Electric, IBM, and Exxon Mobil as examples of misguided policy, given that their current share prices are well below the levels at which large repurchases were made by each. Read More

Imagining the Next Bear Market - Part II

by: Lawrence Hamtil  on Tuesday, March 06, 2018

Last summer, I made an attempt to visualize how the next bear market will play out by using examples from the two most recent S&P 500 bear markets, which began in 2000 and 2007, respectively.  Then, earlier this year, I looked at drawdowns for the S&P 500 at both the index and individual sector level.  I thought it might be helpful to build on these two articles in an attempt to estimate (albeit in a very crude fashion) the depth of the next S&P 500 bear market. Read More

Concentration, Diversification, and the Small Company Premium Abroad

by: Lawrence Hamtil  on Wednesday, February 28, 2018

Recently, the Indexology Blog produced by S&P Dow Jones published an interesting article showing that when sectors become excessively concentrated, - meaning that relatively few companies constitute a large portion of the sector, - sector portfolios that are equal-weighted (that is, more exposure to smaller companies) are subsequently likely to outperform (graphic via SPDJ): Read More

The Case for Global Small Caps Is Strengthening

by: Lawrence Hamtil  on Monday, February 19, 2018

It has been widely-discussed that 2017 was the first year in quite some time that just about every major region outperformed the U.S. equity markets, at least when measured in dollar terms.  What has been less discussed, however, is that global small cap stocks, - whether in Japan, Asia, Europe, or emerging markets, - outperformed small cap U.S. stocks by an even greater margin.  In fact, you would have to go back to 2005 to see such strong and widespread performance for non-U.S. small caps relative to U.S. small caps: Read More