Category Archives: Daily Top Ten

Topley’s Top 10 – August 27, 2020

1. Recent History of Incoming and Outgoing Dow Constituents

The graph below shows the performance of the Dow index, an equal-weight portfolio of the three stocks coming into the index, and an equal-weight portfolio of the three stocks going out of the index.  For the past three years, the outgoing members shown in black have hugely underperformed the incoming members indicated by the blue line.

2-3.  This Bull Market is the Longest But Still Not Strongest…..1990’s Internet Bubble Ending Was Strongest.

Which Bull Will It Be?

Posted by lplresearch

Market Blog

The incredible rally off the March 23 bear market bottom continues, with the S&P 500 Index up more than 50% from those fateful lows. It feels like a lifetime since the longest bull market ever ended. Remember though, although the recent bull market was the longest, it wasn’t the greatest, as the 1990s bull gained more on a percentage basis.

We discussed in detail what the new highs in the S&P 500 meant here, so we won’t dive into that again. But this time we’ll show just how this rally ranks versus others that ended major bear markets. As shown in the LPL Chart of the Day, this new bull market, up to this point of about five months, is stronger than any other major bull market’s start going back to World War II.

“Yes, this new bull market is the strongest bull market we’ve ever seen after five months,” explained LPL Chief Market Strategist Ryan Detrick. “But that shouldn’t be a source of worry. The previous two strongest rallies up to this point were in 1982 and 2009, and both saw continued strength during the first year of the new bull market.”

Here is a chart showing just this bull market and the ’82 and ’09 bull markets.

4. Corporate Defaults Have Tripled

Capital Group Blog

  • Corporate defaults have jumped, but the default rate has been low for a very long time
  • The market for lower rated companies is much less efficient, so there’s more opportunity to differentiate and find value
  • Especially over the long term, returns on high-yield bonds (BB/Ba and lower) can provide investors who are willing to take a little higher risk of loss a significant income boost

5. Warren Buffett: The Best Way to Learn About Business

Buffett’s comments from 1998 about business schools

August 21, 2020 | About: BRK.A +0.37% BRK.B +0.35%

Over the years, Warren Buffett (TradesPortfolio) has criticized business schools for the way they teach students. Buffett has disagreed with business schools’ views on the cost of capital and efficient market theory, to name just two points. He’s also attacked the way business schools teach students about business valuation.

Buffett was taught how to value companies by the dean of value investing, Benjamin Graham. Over the years, he’s developed and refined the strategy, building his own views into Graham’s fundamental base.

The Oracle of Omaha has never laid out the exact process he uses to value businesses, and that may be because there isn’t one. He has so much experience evaluating companies, he knows what to look for and what to avoid without consulting a guide.

The best way to learn

Buffett has made some comments in the past about the best way to learn company valuation. Indeed, at the 1998 Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) annual meeting of investors, he proclaimed that if he were to run a business school, Buffett would get students to study business after business, rather than focusing on other topics. Here’s what he said at the time:

“I were teaching a course on investments, there would be simply one valuation study after another with the students, trying to identify the key variables in that particular business, and evaluating how predictable they were first, because that is the first step.”

The aim of this process, he explained, would be to get students to recognize essential qualities to help them find a handful of successful investments:

“If something is not very predictable, forget it. You know, yo