Weekend Reads for Investors: Stocks Surge, Will Earnings Follow?

Investors unnerved by news that US companies have been talking third quarter earnings estimates down at the second highest rate since 2001 might take solace in the fact that this year’s second quarter captured the top spot for negative revisions — not bad for a period in which the S&P 500 Index returned a respectable 2.9%. US stocks tacked on another 5.2% in the most recent quarter, and most developed markets followed suit. Japan’s Nikkei 225 Index was up 6.3% during the quarter, while China’s Shanghai Composite returned 11.1%. European stocks led the way, with most countries seeing their stock markets surge by double digits. Stocks have been buoyed in large part by central bank accommodation, but for them to remain aloft companies will likely need to deliver on the bottom line.

Here are some stories you may have overlooked in recent weeks.

Strategic Thinking

• Eight enduring principles of value investing, as practiced by Brown Brothers Harriman (Advisor Perspectives, PDF)
• Does intense competition, technological advances, and regulatory changes mean alpha is doomed? (Institutional Investor)
• Jeremy Grantham on commodities, short-termism, and bubbles. (The Wall Street Journal)
• Short seller Jim Chanos is the fraud detective. (Yale Alumni Magazine)
• Richard Bernstein says we should look to developed markets for growth. (Richard Bernstein Advisors, PDF)
• Profiting from smart beta and mean reversion. (Research Affiliates)

Moving Beyond the Financial Crisis

• In case you were worried about ex-Wall Street chieftains from the financial meltdown, they seem to be doing fine. (The Center for Public Integrity)
• According to Chris Whalen, “too big to fail” bailouts are here to stay. (The National Interest)
• “Les Patrons Mangent Ici” is a sensible call for alignment between investment managers and their clients. (New City Initiative, PDF)

Shareholder Values

• With piles of cash and access to cheap debt, companies can do more to unlock shareholder value. (Context)
• Has the cult of shareholder value wrecked American business? (The Washington Post)
• How does the Shiller P/E stack up against other cyclically-adjusted valuation measures? (Social Science Research Network)

Asia in Focus

• Addressing the challenges faced by the Chinese pension system. (The Paulson Institute, PDF)
• Before taking charge at the Royal Bank of India (The Caravan), Raghuram Rajan made the case for India. (Project Syndicate)

Tesla Skeptics

• Marveling at Tesla’s feat of (financial) engineering. (The Washington Post)
• Valuation pro Aswath Damodaran kicks the tires of Tesla. (Musings on Markets)

All Atwitter

• The long anticipated Twitter IPO filing is out. (SEC.gov)

Behavioral Problems

• Breaking Bad as a business primer. (The Economist)
• In an excerpt from the just-published What Happened to Goldman Sachs, a Goldman alum describes how the firm changed from an ethical standard to a legal one. (Fortune)
• William D. Cohan is looking for accountability when it comes to JPMorgan’s biggest mistake. (Bloomberg)
• Revisiting Tulip Mania. (Liberty Street Economics)

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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