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Change Your Perspective

The Big Picture

Fair Value : Valuation of equities is one of those things that seems to confuse so many. Earnings are a fact, analysts’ earnings estimates are an opinion. If a company’s earnings are above or below consensus, it was the analysts who got it wrong and not vice versa.

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MiB: David Einhorn, Greenlight Capital

The Big Picture

Time magazine named him to their “100 most influential people in the world” in 2013. He famously shorted Allied Capital in the 2ooos and Lehman Brothers about a year before it collapsed into bankruptcy in 2008. In our wide-ranging discussion, Einhorn stated that “Market structures are broken and value investing is dead.”

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Revisiting the Market Valuation in the Wake of This Year’s Decline

Validea

With the S&P 500 now close to 20% off its highs, I thought now might be a good time to look to our market valuation tool to see where things stand. But before I do that, I wanted to first cover two caveats I always put in articles about market valuation. With that all being said, let’s look at the current valuation data.

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Strategy of the Week: The Peter Lynch P/E/Growth Investor Model

Validea

By using the PEG ratio, Lynch sought to identify stocks that were not only growing quickly but also trading at valuations that made sense relative to that growth. S&P 500 +23.5%) 2013 : +47.6% (vs. This version of the model has been the best-performing variant among Lynch-based strategies on the Validea platform.

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Strategy of the Week: Ben Graham Value Investor Model

Validea

His model is both conservative and disciplined, focusing on balance sheet strength and attractive valuations. Moderate Valuation (P/E 15) Limiting how much you pay for earnings ensures you dont overpay for future growth that may never materialize. Reasonable Price/Book Ratio (P/B P/E 22) A safeguard against excessive valuations.

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Strategy of the Week: The Motley Fool Small-Cap Growth Investor Model

Validea

A companys price-to-earnings (P/E) ratio must be in line with or lower than its earnings growth rate to ensure valuation remains attractive. This strategy had big winning years like 2013 (+65.9%) , 2020 (+106.5%) , and 2021 (+51.7%) but also suffered steep declines, including 2008 (-27.0%) , 2011 (-16.7%) , 2015 (-9.6%) , and 2022 (-30.3%).

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Should I Time the Market?

The Irrelevant Investor

Given where valuations are, and that he has many decades ahead of him, would it make sense to wait for a better pitch over the next five years? We could have had the exact same conversation in 2013 as the market was approaching new all-time highs. In March 2013, at a CAPE of 22.5, And stocks weren't exactly a bargain.