At the start of each quarter, we provide a detailed summary of the just completed quarter with the goal of helping investors make better investment decisions, in addition to provide insights that will facilitate investor communications, client conversations, and quarterly letters. Furthermore, our quarterly report seeks to identify emerging risk management concerns and give investment
In today’s research we assess the industrials sector the “Trivariate Way” by analyzing available alpha, macro conditions, fundamentals (growth and profits), valuation, quant signals and efficacy. Our proprietary industrial activity gauge has been declining for three months now, with key inputs like durable goods and ISM down and overall transportation data (trucks and rails) also
In today’s note, we identify a major reason why stock picking and alpha generation have been so challenging in recent months. Fundamental investors often cite several variables when outlining their thesis to buy a stock. These variables include like revenue growth, EBITDA margin expansion, shareholder return (dividend plus buyback yield), price-to-free cash flow, and other signals.
Our focus over the last two weeks when writing the Level Set has been on corporate earnings. We detailed the primary risks to 2023 earnings, as well as our growing concern that SP500 2024 earnings could be below 2023. This week we pivot our focus to interest rates, which now sit at levels many market
For several months we have been monitoring an important dynamic – manufacturing production vs. consumption in various industries. Inventory will be the single most important KPI during Q3 earnings. For large cap stocks, inventory-to-sales is near all-time highs. The industries and stocks that are at particular risk of material downward revisions are… 202209_Inventory_Trivariate-1Download
In most of our client meetings in New York, Boston, and South Florida this week there was substantial focus on what we discussed in last week’s Level Set – corporate earnings. Here is what we know… It is now the consensus view that 2023 earnings expectations are excessively optimistic. As we showed last week, 2022
Is generating alpha harder right now? We looked at several common investment approaches, including price-to-forward earnings, free cash flow yield, stock buybacks, short interest, and others, and found that reversals and volatility in performance are at their highest levels in over 15 years. Using a consistent investment discipline has never been more challenging. Free cash
It is widely known that corporate earnings expectations are too high and are coming down. We and others have been talking about it for months. The question that everyone is trying to answer now is how much are corporate earnings coming down and what does that imply for a trough in the SP500? Several investors we
We have been surprised that during recent meetings the subject of the inverted yield curve rarely surfaces. The market sell-off earlier in the year was at least partially the result of a higher probability being assigned to stagflation. The 2-year, 5-year, and 10-year yields have been fully inverted since July 5th (it was April 1st for the 2-year vs. the 10-year) and the market sold off hard in anticipation. Of the nine inverted-curve cycles in the last half century, SP500 returns this cycle have been the most volatile, indicative of the differing paths that may unfold, and the challenge to forming an “inverted yield curve playbook” for equity investors.
Our latest market overview: a comprehensive document containing the best of our recent work and up-to-date views.
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