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learningfromgiants

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  1. Thanks for the replies and input. I appreciate that it is a pretty blunt tool. @scorpioncapital so intangible vs tangible assets, where intangible has lower physical cost and freeing up margin leading to higher ROIC and higher multiples. Is that what you mean? If so, that is a valid point and has certainly been a driving force in the market. @Gregmalno certainly at all I am looking at each stock relative to what growth has been priced in and trying to be objective by using CAPM and median Beta. I am not trying to macro prognosticate, but find mispriced micro relative to how companies have been priced in the past. I.e market is pricing in negative growth forever for Company A, but it has priced in between 1-2% for the last 15 years, so it could be undervalued. In general, I think that I am concerned that the analysts/investors/the market are anchoring on rates being where they have averaged over the last 10 years, not where they have averaged longer term. Really appreciate the input!
  2. I run watchlists using the rearranged Justified Price to Book Formula to calculate historical, current and consensus implied market earnings growth rates. It is crude, but very interesting. What I am noticing at the moment is that that as rates in the 10 year have blown out that current prices for many US , especially large cap, names are pricing in abnormally high growth rates, seemingly due to too low cost of capital. This assumes that rates stay flat, which I don’t think is unreasonable given that this was the norm earlier on the 2010s and the 2000s. I am curious whether anyone else is finding that prices in general are still not reflecting the new normal for cost of capital? Many analysts out there are still pricing off of 5 year average multiple ranges, which just seems ludicrous given how the risk free rate has moved. Any thoughts (especially contrary) would be greatly appreciated!
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