Since DCF valuation and Applied Finance’s Economic Margin® Valuation Framework are often misunderstood, I thought I would address common errors and misunderstandings regarding how the investment community thinks about valuation.

Factor models are extremely popular for their objectivity. However, such models fail to properly incorporate Valuation and Wealth Creation. When properly defined - Valuation, Wealth Creation, and Leverage make the popular factors used in most quantitative models statistically insignificant.

This talk examines problems with traditional factors, accounting data, and popular valuation approaches. We present an empirically superior alternative approach to portfolio construction regardless of size or style.

For the past 10 years, “Growth” investing has dominated “Value” investing. Yet in the previous 10 years, “Value” investing dominated “Growth” investing. These “styles” tend to go in and out of favor, leading investors to chase returns to the detriment of their long-term wealth creation.

Valuation Driven Investing® breaks this paradigm by focusing on companies that trade below their intrinsic value, factoring in company specific:

• Economic Profitability
• Investment Growth
• Competitive Reality
• Risk

This webinar covers:

• Why earnings are a poor proxy for economic performance
• The unrealistic assumptions embedded in traditional DCF models
• How “Value” investors confuse cheapness with true value to their client’s detriment
• When “growth” investing destroys wealth
• Applying Valuation Driven Investing® for “value”, “dividend”, and “growth” strategies

This review will explore why passive investing may not provide the bargain most advisors think they are getting for their clients. This is especially important as most managers have underperformed their benchmark YTD with such cyclical market performance. Although difficult to find, investors should still seek out skilled managers that stick to quality investment philosophy and process.

The stock market today is trading at valuation levels last seen in 2008, before an unprecedented wealth creation bull market swept away the fear of the Great Recession. Then as now, it’s always about the expectations built into market prices.

Despite decades of academics and practitioners promoting the “value factor,” it generates marginal to no long-term alpha. Four reasons have slowed the transition from the accepted “value” regime (low price to something) towards a more robust and realistic true value regime (worth measured independent of market price and focused on the value of future cash flows).