Weekend Reads for Global Investors: Is the Price Right?
“Is the price right?” astute investors are always asking themselves. This week seems a particularly good time to highlight some of the (mis)pricing situations on the minds of sharp investors.
Apple has just become the first American company to reach US$ 700 billion in market valuation, and Carl Icahn thinks it should be worth almost twice as much. The median price target of 41 analysts is only $133, marginally higher than where the stock is trading now and far short of Icahn’s projection.
I’m not sure who is winning this bet, but it does beg the question: How much is analyst research worth? Thanks to a new EU regulation, we are about to find out the answer, at least in the European Union and likely in the United States. According to the new law, buy-side firms will now have to pay for specific analyst research. The prevailing industry practice has been to pay for research through commissions.
“Emerging Market Stocks = Cheap” — Jack Ablin, CFA, CIO at BMO Private Bank, reached this conclusion after looking at relative historical valuations. Has the “Taper Tantrum” created an opportunity for investors? I met Professor Andrew Karolyi at an academic conference in Sydney last December. He is a prominent researcher studying emerging markets, among other things, and I have since written about his latest project, which provides some unique perspective on the subject.
I would be remiss if I did not mention another bet: Warren Buffett vs. Ted Seides, CFA (Protégé Partners). It was a million-dollar bet. Read all about it in Seides’s own account for the Enterprising Investor.
Is the Price Right?
- Can the largest company in US history in terms of market capitalization still be undervalued? One of its biggest shareholders thinks so. “Icahn Values Apple at More Than $1 trillion” (CNBC)
- How much is analyst research worth? Thanks to a new EU regulation, we are about to find out. “Banks Forced to Shake Up Analyst Research Business” (Wall Street Journal)
- “Emerging-Market Stocks = Cheap,” says Jack Ablin, CFA. (The Big Picture)
- Ted Seides, Protege Partners, provides a first-person account of how things have progressed seven years into the ten-year bet with Warren Buffet. “Betting with Buffett: Seven Lean Years Later.” (Enterprising Investor)
- “Emerging Markets Guru Mark Mobius — A Few Thoughts on Greece” (GuruFocus)
- “Is Greece an emerging market?” If that question ever crossed your mind, or if you are just wondering what makes a market “emerging,” check this out: “Have Emerging Markets Emerged?” (Enterprising Investor)
- For a deep dive into the subject, read on: “Where to Invest in Emerging Markets: Lessons from the Taper Tantrum” (Enterprising Investor)
- “The Most-Promising Emerging and Frontier Markets, Ranked” (Bloomberg)
- If you think you’ve just learned all you needed to know about emerging market investing, the market has served up a pop quiz. “Here Come the Bears: EMs Crisis Brewing” (CNBC)
- “Bracing for Another Storm in Emerging Markets” (Naked Capitalism)
- Robert Hagstrom, CFA, did some simulations to demonstrate “One Way to Beat the Market.” (A Wealth of Common Sense)
- I alluded to this strategy recently as one of the four mistakes to avoid in “Beating the Market: Four Mistakes to Avoid.” The final answer lies in the confidence one places in the investor. Since we are all predisposed to be overconfident, about either our own investment skills or our skills in picking the great manager, the strategy seems like a risky bet for most. (Enterprising Investor)
- Jason Zweig of the Wall Street Journal highlights a similar risk in “When Bond Funds Jump the Fence.” It all comes down to knowing yourself as an investor. As a fund manager, do you have the skills to take on that additional risk? As a fund investor, do you have the skills to pick the right fund? Don’t jump the fence unless you are well equipped. (Wall Street Journal)
- Patrick O’Shaughnessy drills down into a value factor in “The Very Cheapest Stocks (Price/Book) Do Very Badly.” (Millennial Invest)
- Would you invest in a bond guaranteed to lose money? Plenty of investors are saying “yes.” “Something Economists Thought Was Impossible Is Happening in Europe” (Vox)
- “Let’s Have a Hayekian Welfare State” (Adam Smith Institute)
- Economics comes in many shapes and colors. If Hayek is not for you, try this: “What Is a ‘Liquidity Trap’ and Why Is Bernanke Caught in It?” (Streettalk)
- If you liked the last article, read on: “Joseph Stiglitz: Europe and Austerity Failed Greece.” The Nobel laureate and former World Bank chief economist opines on the situation in Greece. (Salon)
- Striking the right balance between growth and clean air is not as easy as it sounds. “The Cost of Clean Air” (The Economist)
- In its competition with China for faster economic growth, India has already done too much damage to its air quality. “Airpocalypse” (The Economist)
- Los Angeles has a spotty history in terms of air quality. And it has still not put the problem behind it. “A Disgusting Day to Breathe in L.A.” (Earthjustice)
And Now for Some Reading Truly for the Weekend . . .
- Barry Ritholtz bids a serious farewell to the departing, often irreverent Daily Show host Jon Stewart. “All Hail the Daily Show!” (The Big Picture)
- A satirical interpretation of some of the jargon and sayings you hear regularly in the investment business: “What They Really Mean” (Bason Asset Management)
- “A Dozen Things I’ve Learned from Sheryl Sandberg about Management, Careers, and Business” (25iq)
- “A PR Pro’s ‘How To’ on Earning Trust, Helping Earnings” (Forbes)
- Science has spoken: “Tilapia Is Worse Than Bacon” (Eat This)
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
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2 thoughts on “Weekend Reads for Global Investors: Is the Price Right?”
Great post. I found some of the posts, particularly the posts on beating the market through concentration and why low price to book investing is a bad idea very interesting.
Here’s one you might also like, can statistics help us to identify market-beating fund managers?
Thank you for visiting our blog! I’m glad that some of the ideas resonated with you.