The value of Economic Data vs. Accounting Data

Low Economic & Accounting P/E Relative to a Global Benchmark

 

 

  • This chart shows the relative performance of two cheap multiple strategies, one computed with accounting data, the other with ValuAnalysis' corporate economic data.

 

  • Even though both outperform, accounting information gives a tepid performance and seems to be prone to occasional breakdowns, as in the recent past.

 

  • The cheap multiple strategy based on economic data has a clearer, superior and more stable outperformance pattern, and has added 320 bp of relative performance per annum to the accounting-based strategy.

 

An Integrated Process Leading to a Coherent Portfolio

 

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Common Sense Stock Selection: Avoiding the Worst Investments

 

va00000 chart rent yield

 

  • It is often a bad idea to invest in low cash yielding businesses. This is the lesson of the above chart, where the periods of outperformance of a high yielding portfolio do exist (see mid 2006 to mid 2008) but are dwarfed by the downward trend of the low yielding portfolio.
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  • It is always a bad idea to overpay for an asset. This is, in essence, the lesson of the above chart. A portfolio made of the more expensive stocks has never outperformed consistently since 2006.