Template Title

Countering the Narrative About Value

by: Lawrence Hamtil  on Monday, December 04, 2017

There have recently been a slew of articles about how value investing has lost its edge.  Some have argued that the value premium has been arbitraged away by investors, while a few have claimed that perhaps a new era has arrived during which growth investing will be in favor.   Read More

The Annoying Capex vs Buybacks Narrative

by: Lawrence Hamtil  on Monday, November 27, 2017

The historical outperformance of companies that return capital to shareholders tax efficiently through buybacks is no mystery.  It is, in fact, a well-documented and thoroughly analyzed phenomenon.  However, there exists a tired but persistent narrative that says that CEOs who engage in buybacks are 'out of ideas,' and are content merely to cannibalize their future growth for "short-term" rewards.  The corollary to that narrative is that investors would instead be better off investing in companies that focus on investing in the future via large capital expenditures, or "capex" spending. Read More

Productive vs Unproductive Behavior

by: Lawrence Hamtil  on Friday, November 17, 2017

Having recently engaged in a little self-reflection about my productive and unproductive habits, I thought I would share with my readers what I think are constructive habits, and which habits are counterproductive at best.  Here are a few: Read More

A Few Excellent Books On The Great War

by: Lawrence Hamtil  on Monday, November 13, 2017

November 11th marked the 99th anniversary of the end of World War I, so in honor of that, I wanted to share a list of some of my favorite books on the war. Read More

Faith in Compounding Is Not Enough

by: Lawrence Hamtil  on Friday, November 10, 2017

Earlier this week, Nick Maggiulli wrote a brilliant post that demonstrates the power of compounding by showing how a little savings over time adds up to real wealth.  His insights got me thinking about the nature of compounding, and how its power is actually everywhere around us.  For instance, the nation in which we live is the product itself of more than two centuries of compounding:  the countless decisions over time by revolutionaries, policymakers, military figures, and millions of individuals cumulatively add up to where our country finds itself today.  Our individual lives themselves reflect generations of compounding, and where each of us is today is only in small part the product of his or her own conscious decisions. Read More

Two Myths That Deserve To Die

by: Lawrence Hamtil  on Tuesday, November 07, 2017

Perhaps because people choose to believe popular narratives over overwhelming evidence, many myths persist in the financial realm.  In a way, this should not be surprising as many things in finance seem intuitive, but in reality, are much more complicated than we might think.  In this article, I will attempt to put to rest two myths that seem to be prevalent today. Read More

Two Ways 2017 Differs From 2000 and 2007

by: Lawrence Hamtil  on Monday, October 30, 2017

There is a lot of angst these days about the stock market, with the usual suspects calling for a crash that will dwarf those of 2000 and 2007.  The purpose of this article is not again to refute those naysayers, but to show two very important distinctions, - one fundamental, the other technical, - between today's market, and the markets of the two most recent significant peaks. Read More

Valuation Update: Equity Multiples & T-bond Yields Relative to Inflation

by: Lawrence Hamtil  on Tuesday, October 24, 2017

A common theme of this blog has been that valuation data, in order to be useful, should not be looked at in isolation, but rather should be viewed in the context of inflation.  That inflation does matter to equity valuations and bond yields can easily be seen in the chart below, which shows the S&P 500's earnings yield (the inverse of the P/E ratio), the S&P 500's CAPE yield (the inverse of the CAPE ratio), and the 10-year Treasury bond yield versus the rate of inflation.  In the postwar period, particularly since 1960, all four have tracked one another very closely: Read More

The Case for Health Care Stocks

by: Lawrence Hamtil  on Monday, October 16, 2017

Tadas Viskanta over at Abnormal Returns has an interesting symposium today on the topic of what investments might be better investments over the next decade than the S&P 500.  The suggestions made by his featured guests are varied and creative, and they are worth checking out.  However, I would like to add a suggestion or two of my own. Read More

Testing the Small Company Premium at the Sector Level

by: Lawrence Hamtil  on Monday, October 09, 2017

In a previous articled titled, "Learning the Wrong Lessons," I discussed how the small company premium is a real enough phenomenon, but that for it to be realized by investors, portfolios must be sufficiently diversified in order to reduce the extreme risk inherent in small companies.  However, most studies on this subject have examined portfolios of large and small companies only on the basis of random selection, which does not tell us much other than that individual large companies tend to mirror the capitalization-weighted market more closely and with substantially less risk than individual small companies. Read More