The hottest Equity Valuation Substack posts right now

Many investors treat very expensive stocks like lottery tickets, hoping for a rare big payoff instead of focusing on realistic expected returns.
Surveys and analyst reports find the majority (about 60% overall and 81% of retail investors) hold high-valuation stocks because they expect high future returns, while far fewer cite superior fundamentals (~15%) or safer past performance (<10%).
These beliefs contradict finance theory and empirical evidence, yet investors remain convinced and continue to hold expensive stocks despite knowing their high valuations.

Corruption in a country can act like a hidden tax, raising costs for businesses and creating an uneven playing field. Companies that navigate corrupt practices well may even gain a competitive edge over those that don't.
Violence, whether from war or crime, makes it expensive and risky to run a business. Companies must spend more on security and may face high costs if violence disrupts their operations.
The protection of property rights is crucial for businesses. If a legal system fails to enforce these rights, the value of a company and its assets can drop significantly.

In 2014, the US stock market did well but some emerging markets performed even better, suggesting potential opportunities elsewhere. It's important to think beyond just strong performers when investing, as the market can shift quickly.
Country risk can be tricky to assess, and two common methods are looking at sovereign ratings and CDS spreads. These numbers help understand the risks investors face in different countries.
Even risky markets can offer bargains if the prices are right. It's key for investors to consider both risk and potential return when evaluating global opportunities.

PE ratios help investors compare stock prices across countries, but many companies have negative earnings making PE less useful for them. It's important to consider the overall financial health of countries, not just their PE ratios.
Price to book ratios can give a clearer picture of a company's value but should be used carefully. Countries with low price to book ratios might look cheap but could also have low returns, suggesting a deeper look is needed.
Enterprise value to EBITDA multiples provide another way to assess company value, though they can sometimes show unexpected results. High returns on invested capital don't always align with high EV/EBITDA ratios, so understanding each country’s context is key.

You can use relative standard deviations instead of regression betas to measure risk. This method looks at how a stock's volatility compares to the average volatility of other stocks.
Option-based methods provide a forward-looking estimate of risk by using prices from traded options. However, this approach only works for companies with those options and bonds available.
Accounting betas are calculated by looking at changes in a company's earnings compared to the overall market. They can be a stable alternative, especially for private companies, but their lagging nature can be a drawback.

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