- Your article on inter-Sector correlations sheds some light on the causes of our recent results (over 50% spread between under and over valued screens) seen here:
Short Term Results (16 months)
The performance of the screens have been particularly consistent since June 2016 as the graph below shows. The Undervalued have outperformed our Universe by 31% while the Overvalued under performed by 19% for a spread of over 50% in 16 months.
(see site for graphs)
A simple explanation would be value vs growth but this doesn’t hold up as the underlying principal of Corequity analysis is to put a price on growth specific to each company. This is further supported by the recent relative performance of the ETFs SPYG and SPYV, being the Spider ETFs for S&P 500 Growth and Value stocks.
This (the graph) bears no resemblance to the UV/OV screen graph for the same period especially if the same scale is used.
- I applaud the majority of the 7 comments above which see stock buybacks programs as seriously flawed.
To see how bad stock buybacks compare to investments visit “The Net Profit Test” (https://corequity.blogspot.com/2016_04_01_archive.html) and you will see a graph that compares the annualized returns from buybacks to investments.
From the perspective of the Shareholder (vs the share seller), Buyback returns are simple interest vs compounding from investing.
CEOs that buyback their company’s shares are admitting that they don’t know how to invest the cash profitably. One would think that would be their most important responsibility.