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Learning that drives better investment decisions

Finding Value in Today’s Slowing Consumer Sector

By Andrew Stotz | Jul 31, 2015

VIDEO BLOG: Though the consumer discretionary sector has been slowing, there is still strong and stable profitability in emerging markets.

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Business Managers and Owners should Look for Profitable Growth

By Andrew Stotz | Jul 23, 2015

In April I blogged about EPS Growth, and followed this with a post about profitability (Replace “E” with “A” to Truly Understand Business Profitability). Today, I focus on a combination of these profitability and growth measures, which I call “Profitable Growth”.

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Unilever Indonesia generates a 130% ROE

By Andrew Stotz | May 26, 2015

Unilever in Indonesia generates an amazingly high level of profitability, with a return on equity (ROE) of more than 100%. What’s more, this large-cap stock has low correlation with Western stock markets, low volatility compared with other Indonesian stocks, and strong earnings momentum

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Replace “E” with “A” to Truly Understand Business Profitability

By Andrew Stotz | May 13, 2015

If a company can generate a good net profit relative to the assets it invests in, its return on assets (ROA) is strong. ROA is a measurement that matches the way a manager thinks about business – What assets do I need? What do I get in return?

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Sheng Siong Group Limited – a Singaporean Mid-Cap with Strong Momentum

By Andrew Stotz | Apr 28, 2015

This third largest supermarket chain in Singapore, Sheng Siong Group Limited, has 35 outlets and steady EPS growth. This mid-cap stock has strong profitability, low volatility, no debt and good price momentum, though this combination does not come cheap. I like the steady, defensive nature of its business and its slow rise in net profit margin over the past two years.

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Invest in EPS Growth – It Pays

By Andrew Stotz | Apr 24, 2015

Whether managing a business or investing in one, it is critical to focus on earnings-per-share (EPS) growth. This one measure tells almost the entire story of a business. My analysis of 8,000 companies across the globe shows that their combined EPS has been contracting by 3% per year over the last four years.

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Debating a Harvard Professor’s Criticisms of the Finance Industry

By Andrew Stotz | Apr 15, 2015

A recent article in The New York Times Upshot section by the Harvard economist, Professor Sendhil Mullainathan, titled, “Why a Harvard Professor Has Mixed Feelings When Students Take Jobs in Finance” was a weak attempt at arguing the case that finance professionals add little to no value to society and that people working in the industry are mainly carrying out immoral or illegal acts.

This is my reply.

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Majority of Investors Drive their Portfolios without a Diversification Seatbelt

By Andrew Stotz | Apr 8, 2015

It’s a choice that’s nearly a matter of financial life or death. Deciding the right number of stocks to hold in your portfolio is a balance between risk and return – too few and your risk is high, too many and you might as well own a broad market fund or ETF. Research shows that the average active investor owns only two! That’s far too low.

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Trading is Still Hazardous to Your Wealth

By Alexander Wetterling | Apr 6, 2015

So you think you are an above-average investor? Svenson (1981) asked Americans and Swedes whether they were above-average drivers. His findings were that more than 90% of Americans and about 70% of Swedes thought of themselves to be more skillful drivers than the average. The impossibility of these perceptions demonstrates the existence of overconfidence bias among humans.

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Profit from Pessimism: Finding Value When a Company’s Outlook is Poor

By Andrew Stotz | Apr 3, 2015

My research covering 4,000 companies across the world shows that, over the past 22 years, financial analysts have been wrong in their earnings forecasts about 33% of the time.

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