We’re a little more than a week into the 2018 FIFA World Cup, and so far Russia has surprised experts and fans alike. Expectations were low at best. Because of recent setbacks, including a disastrous performance at the 2016 UEFA European Championship and injuries sustained by key players, the federation ranked a dismal 66th place among Fédération Internationale de Football Association teams—its lowest position ever. The only reason it didn’t have to qualify to compete was because Russia is the host nation. (This is the first time in its 88-year history, by the way, that the World Cup has been held in Eastern Europe.)
The economic calendar is modest. Volatility is lower even with plenty of news. The summer doldrums have arrived! It provides time for introspection to fill those empty timeslots and pages.
PepsiCo (PEP) is a Dividend Aristocrat, Champion and blue-chip stalwart that has increased its dividend for 46 consecutive years. Therefore, it should be no surprise that just as we saw with Procter & Gamble in part 5, this blue-chip stalwart has traditionally commanded a higher valuation (earnings multiple) than the average stock.
I spend a lot of time on the road speaking to our investors and advisors and one of the common questions I get during the Q&A sessions is, “What keeps you up at night?” Aside from having an 18-year old daughter—and being a chronic insomniac anyway—my reply usually centers around debt and the burden it has and will continue to place on our economy.
Greg Silberman explains his take on the life cycle of private investments.
Small caps have materially outperformed large caps in 2018, with the S&P SmallCap 600 Index outpacing the S&P 500 Index 7.80% to 2.58% between Dec. 29, 2017, and May 25, 2018. Below, I highlight the drivers of small-cap returns this year, and why I believe the trend could continue.
Much has been written about residential mortgage modifications, yet hardly anything has been said about the problem of re-defaults on modified mortgages. In large part, this is due to the paucity of accurate data about borrowers re-defaulting. It is time to clearly lay out how extensive this problem really is, what it means for mortgage markets and the dangers it poses for investors.
To put Procter & Gamble’s current valuation into perspective, this blue-chip can be purchased today with a 3.7% current dividend yield which is hovering around the highest it has been over the past two decades. Furthermore, Procter & Gamble appears attractively valued over virtually every rational valuation metric that prudent value investors might consider.
Investors and their advisors must be alert to managing both pre-tax and after-tax alpha in order for investors to realize the highest possible return from their taxable portfolios. Increasingly, the opportunities to accomplish both goals are within reach of investors through, for example, tax-advantaged smart beta strategies and tax-efficient vehicles such as ETFs.
Based on the logical, risk-based explanations for the value premium, and the lack of evidence pointing to shrinking valuation spreads, my conclusion is that the most recent 10 years of performance is likely just another of those occasionally occurring but fairly long periods in which the value premium is negative.