Stocks for the Long Run : the Definitive Guide to Financial Market Returns and Long-term Investment Strategies

7 CHAPTER STOCKS: SOURCES AND MEASURES OF MARKET VALUE Even when the underlying motive of purchase [of common stocks] is mere sp ...

yields fell to the level of bond yields. The stock crashes of 1891 and 1907 also followed episodes when the yield on bonds came ...

and bond yields was clearly posting a warning signal, but investors still believe inflation is inevitable and stocks are the onl ...

assets. One can estimate the investment value of shares by forecasting and valuing these expected cash flows.^5 More generally, ...

or otherwise increase value. If a firm repurchases its shares, it reduces the number of shares outstanding and thus increases fu ...

reserves. Great investors, such as Benjamin Graham, made some of their most profitable trades by purchasing shares in such compa ...

generate higher dividends in the future, so that the present value of those dividends is unchanged, notwithstanding when they ar ...

If instead the company did not pay a dividend but invested its earnings in assets whose return is the identical 10 percent, the ...

counting Standards Board (FASB), an organization established in 1973 to establish accounting standards. These standards are call ...

cluding too many expenses. For example, Cisco Systems wrote off in- ventories that the firm couldn’t sell and used accounting te ...

profits to new shareholders who, through options, purchased the shares at below market prices. In 2000 the FASB reversed its pos ...

contributions directly into assets that are owned by the employees. In these plans, the firm does not guarantee any benefits. In ...

Most investors are fully cognizant of these unfunded liabilities and have taken down the value of the auto manufacturers as well ...

I believe that adopting the concept of core earnings makes a signif- icant move in the direction of standardizing profit stateme ...

Determining earnings will always be fraught with estimates, even if made in good faith. The bottom line is that cash flows, as w ...

though inflation, which raises interest costs, causes a corresponding re- duction in the real value of corporate debt. In inflat ...

firms, such as JDS Uniphase and AOL, that took huge write-offs related to overpriced stocks that were purchased at the height of ...

is the inverse of the price-earnings ratio, and it would be the current yield on a stock if all earnings were paid out as divide ...

The Fed Model, Earnings Yields, and Bond Yields In early 1997, in response to Federal Reserve Chairman Alan Greenspan’s increasi ...

this earnings yield fell below the bond yield and “undervalued” when- ever the reverse occurred. The analysis showed that the ma ...