Rob Arnott Says U.S. Stock Valuations Are a Worry

Rob Arnott, founder and CEO of Research Affiliates, says investors should “avoid U.S. stocks and buy emerging market equities to outperform in the coming years,” according to a recent CNBC interview. Arnott was a pioneer in developing indexing strategies that weight portfolio holdings according to valuation measures rather than market capitalization (a strategy typically used by passive index funds) and therefore overweights undervalued companies and underweights overvalued companies. The article cites data on the Research Affiliates website showing that approximately $179 billion of assets are managed using these strategies as of March 2017. According to Arnott, the U.S. market P/E […]

Grantham Says Higher Valuations Will Remain

“The market can stay irrational longer than the investor can stay solvent”, writes Jeremy Grantham in a recent Barron’s article. Grantham addresses the fact that, since 1996, the market mean PE ratio has risen by 65% to 75%. He covers various periods in history, respective rises and crashes, showing that while there are always oscillations they have settled at a much higher PE: He also notes that profit margins have grown by 30% and represent a higher share of GDP, referring to it as “double counting: above-average profit margins times above-average multiple will give you very much above-average price to […]

Buffett Says Stocks are Relatively Cheap

Notwithstanding all of the buzz surrounding the “pricey” stock market, legendary investment guru Warren Buffett thinks it’s a still the best place to plant your money. This according to a recent Forbes article by Validea CEO John Reese. According to the article, Buffett believes “we’re not in a bubble territory or anything of the sort,” but Reese presents some opposing views including those of Nobel Laureate Robert Shiller. Describing Joel Greenblatt’s use of earnings yield and return-on-capital as evaluative tools, Reese identifies the following five stock picks that score highly based on his guru criteria: CVS Health (CVS) is an […]