Professor Glen Arnold

Many investors swear by the momentum effect as a way of out-performing the stock market. That is, buy a portfolio of shares that have risen the most over the last 3 months, 6 months, or 9 months. Hold them for a few months and then sell them. A variation on the theme: in addition to […]

The academic paper I wrote about in yesterday’s newsletter, by Tao Chu, presented results for a stock market anomaly that I was unaware of. This is the “investment anomaly”. The anomaly bit means that the finding does not fit with the view that the stock market is efficient in pricing shares, which implies that there […]

I’m half way through trawling the entire market to find companies meeting the criteria for my modified cyclically adjusted price earnings ratio portfolio. So far, I have 46 companies “short-listed”, requiring more investigation. It will take a few days for detailed analysis on the one or two companies that might make it through. In the […]

On Thursday I was able to ask the directors of Arden Partners (LSE:ARDN) what plans they had to move out of the value-destroying furrow they had been in for the last few years. Some dismal facts: 2014 profit: £103,000 2015 loss: £2,098,000 2016 loss: £475,000 These losses are enormous relative to both market capitalisation (£6.75m) […]

Holders Tech (LSE:HDT) has not been a great investment. The managers seem to be in the groove of doing the same old loss-making thing year after year. This makes me question whether this is a good company to back. I’ll present some numbers and then draw a conclusion in this Newsletter. Net current asset value […]

A tiddler of a company, Holders Technology (LSE:HDT) entered my net current asset value, NCAV, portfolio in November 2014. Its market capitalisation back then was a mere £1.85m (3.94m shares x 47p). This fell to only £1m in March 2016. Now it is £1.6m (4.06m shares x 40p), or £1.4m at the offer price of […]

We have limited evidence of a relationship between the CAPE level and the returns on shares over the subsequent decade outside of the US and Europe. But what we do have generally conforms to the pattern seen in previous Newsletter: extremely high CAPE means, generally, low returns. Australia Average CAPE (1979 – 2015): 16.5 Source: […]

We have already seen that the US stock market is at a historically high level as measured by the cyclically adjusted price earnings ratio, CAPE (see earlier Newsletters). It has only been higher in 1929 and 1999-2000, which is not very reassuring given the evidence that high CAPEs are usually followed by low returns over […]

Norbert Keimling of Star Capital produced an excellent report in 2016 looking at cyclically adjusted price earnings ratios for 17 countries. Particularly interesting is the data on 10-15 year returns on shares following the time when the market was defined as having a high, medium or a low CAPE. Today I’ll concentrate on the US […]

Many fund managers, analysts, economists and private investors pay great attention to what the 10-year cyclically adjusted price earning ratio is telling us about the level of returns we can expect from shares over the next ten years. Note that while thinkers in this field tend to emphasize evidence showing a relationship between exceptional high […]