Archive | May, 2015

The Knowledge Effect Leads to Excess Stock Returns

In a new white paper released today, we identify a stock market anomaly. The Knowledge Effect is the tendency of highly innovative companies to deliver excess returns for investors. Academic researchers first discovered an association between a firm’s knowledge capital and its stock performance. Our research and index results suggest there is an opportunity for […]

Amazon and Apple: Two Approaches To Capital Investment

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With Apple’s (ticker: AAPL) announcement that are selling more debt in order to buy back more shares and pay out dividends, a client posed an interesting question to us: Do you think Amazon (ticker: AMZN) will announce something similar soon? Our short answer is most likely no since Amazon tends to reinvest earnings, especially in intangible investments, […]

Two Desirable Characteristics Of Innovative Industries

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The most innovative companies in the world tend to exhibit two highly desirable characteristics: high return on invested capital (ROIC) and low long-term debt as a percentage of total capital. There are fundamental reasons for these characteristics. First, innovative companies are very profitable because they invest heavily in an knowledge, or intangible, investments such as […]

Deja Vu All Over Again for the Long Bond?

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The 30-year treasury bond has experienced a rather large selloff by historical standards over the last three months. Yields have risen from roughly 2.2% to almost 2.9% in just over three months – a nearly 25% increase in yield – putting it on par with the most significant selloffs we’ve experienced since 1981. The important […]

An Investigation Into Corporate Investments

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Profitability and investment are inextricably linked through time. A company’s investment decisions today will ultimately drive its profitability level tomorrow.  The fruits of a company’s investment decisions eventually show up in profitability metrics such as free cash flow margin, operating cash flow margin, and return on equity.  Finally. a company’s ability to improve these metrics, […]