Category Valuations

Buying Peak Fear: Why a VIX Above 45 is a Rare Long-Term Opportunity Buying Peak Fear: Why a VIX Above 45 is a Rare Long-Term Opportunity

Buying Peak Fear: Why a VIX Above 45 is a Rare Long-Term Opportunity

It's official... the stock market is now 'on sale'. Panic selling has set in with the VIX trading above 45 - something we have only seen 7 times over the past 25 years. For those who resisted chasing extreme valuations the past 12 months - your patience has been rewarded. Valuations have come down. In turn, the longer-term risk reward is now more attractive than what it was only a couple of months ago. But these are rare times. For e.g., it was the only third time this decade that the S&P 500 shed more than 10% in two days.

Navigating Corrections: Valuation Anchors and the Margin of Safety Navigating Corrections: Valuation Anchors and the Margin of Safety

Navigating Corrections: Valuation Anchors and the Margin of Safety

From the moment Trump announced his blanket 10% tariffs in addition to so-called "reciprocal levies" - it's been an exodus from risk assets. The selling was immediate and sharp - something we've not seen since the pandemic five years ago. However, as I will demonstrate, there could be more to come. And from mine - further sharp selling could set up a great buying opportunity for long-term investors.

How to Value Quality Stocks When Market Uncertainty Peaks How to Value Quality Stocks When Market Uncertainty Peaks

How to Value Quality Stocks When Market Uncertainty Peaks

It doesn't take much these days to knock investors off balance. This week it was Trump's 25% on auto tariffs and a slightly hotter-than-expected inflation print. Tariffs are inflationary... a tax on the consumer. And with (services) inflation remaining stubborn... it gives the Fed very little wiggle room to cut rates. In combination with various geopolitical developments and aggressive government spending cuts from the Department of Government Efficiency (DOGE) - this has pushed policy uncertainty to its highest levels since late 2020.

Market Volatility vs. True Panic: How to Use the VIX to Identify Peak Fear Market Volatility vs. True Panic: How to Use the VIX to Identify Peak Fear

Market Volatility vs. True Panic: How to Use the VIX to Identify Peak Fear

Are markets panicking? That depends on who you ask. A short-term trader might see the ~6% move lower as significant. On the other hand, those who invest for longer-term (such as myself) see a ~6% move down as nothing at all. From mine, panic isn't here yet. However, there is a measure which can help us identify when markets are overly fearful. And generally - they are great buying opportunities. But we are not there yet.

The Limits of Multiple Expansion: Why Price Appreciation Must Eventually Follow Earnings The Limits of Multiple Expansion: Why Price Appreciation Must Eventually Follow Earnings

The Limits of Multiple Expansion: Why Price Appreciation Must Eventually Follow Earnings

Earnings per share growth has averaged 8.3% pa from 2015 through today. However, capital appreciation in stocks (exclduing dividends) has seen a CAGR of 11.0% over the same 10-year period. This divergence is widening which indicates multiple expansion. From mine, investors should be braced for mean reversion.

The Math of Moats: Why ROIC and Free Cash Flow Trump Revenue Growth The Math of Moats: Why ROIC and Free Cash Flow Trump Revenue Growth

The Math of Moats: Why ROIC and Free Cash Flow Trump Revenue Growth

Whilst market's fret about slowing growth ("Ready for a Growth Scare?") - Warren Buffett sits back with a smile. His company - Berkshire Hathaway - rallied to fresh record high this week after the company reported a record high quarterly profit. Its market value is now over $1.1 Trillion. So how did Buffett build this incredible cash machine? I'll outline three (basic) reasons... all of which you can emulate.

Nvidia’s Expectations Gap: Why High Quality Doesn’t Always Mean High Returns Nvidia’s Expectations Gap: Why High Quality Doesn’t Always Mean High Returns

Nvidia’s Expectations Gap: Why High Quality Doesn’t Always Mean High Returns

Nvidia's latest quarterly numbers were very impressive - producing 78% sales growth. They dominate the market for AI chips. A small nitpick could be the three point decline in gross margins (but that's expected). Let's not forget - those gross margins are still 73%. No-one else comes close in the semiconductor industry. So why would the stock tank 8.5%? Simple: expectations. The market knew that Nvidia was going to grow at revenue at least 70%+ where gross margins would be north of 70%. But growth is slowing (as they get bigger) and margins are declining (as competition starts to ramp up)

The Art of Inaction: Strategic Positioning Beats Market Timing The Art of Inaction: Strategic Positioning Beats Market Timing

The Art of Inaction: Strategic Positioning Beats Market Timing

Saturday Feb 22nd was circled on my calendar. It was the day Warren Buffett shared his annual shareholder letter. If you want to become a better long-term investor - it's worthwhile reading every one of his 59 letters (from 1965). With respect to valuations he offered this: “We are impartial in our choice of equity vehicles, investing in either variety based upon where we can best deploy your (and my family’s) savings. Often, nothing looks compelling; very infrequently we find ourselves 'knee-deep' in opportunities.”

The Rules of Engagement: Navigating Market Uncertainty and the Tariff Tug-of-War The Rules of Engagement: Navigating Market Uncertainty and the Tariff Tug-of-War

The Rules of Engagement: Navigating Market Uncertainty and the Tariff Tug-of-War

As an investor - it's very important to know the rules. For example, if the rules are constantly influx - it leads to uncertainty. With heightened uncertainty - you pull back. That's what faces investors. For example, consider the following: (i) direction of monetary policy (e.g., as Powell raised concerns on inflation); (ii) A torrent of policy shifts from the White House; and (iii) major disruption with artificial intelligence - as investors question return on capital invested. Uncertainty in each of these buckets makes it hard to commit to stocks with conviction.

AI Capex vs. ROIC: Why Investors are Questioning Big Tech’s $1 Trillion Bet AI Capex vs. ROIC: Why Investors are Questioning Big Tech’s $1 Trillion Bet

AI Capex vs. ROIC: Why Investors are Questioning Big Tech’s Trillion Bet

Large-cap tech's planned capex for 2025 is worrying investors. What will be the return on that capital? Never before have these companies made such large bets. Before DeepSeek, it was assumed the tech giants - with their deep pockets and almost limitless resources - would enjoy a wide moat in the AI arena. And from there, that justified the high valuation multiples. Not now. DeepSeek’s arrival challenges those long held assumptions (and valuations).