Musings on Markets

JANUARY 31, 2024

In my last three posts, I looked at the macro (equity risk premiums, default spreads, risk free rates) and micro (company risk measures) that feed into the expected returns we demand on investments, and argued that these expected returns become hurdle rates for businesses, in the form of costs of equity and capital.

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Hurdle Rate Profit and Loss Investments Accounting 78

Musings on Markets

FEBRUARY 15, 2023

Starting with gross margins, and computing the number for all non-financial service firms, we report the distribution of gross margins across publicly traded companies at the start of 2023, again based upon gross income and sales in the most recent twelve months: While the median gross margin across all publicly traded global firms is about 30%.,

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Musings on Markets

JANUARY 12, 2021

Last week, was my data week, where I download and analyze data on all publicly traded companies, listed anywhere in the world, and I will post extensively on what the numbers look like after a most tumultuous year. As we approach the turn of the calendar year, I have my own set of rituals that prepare me for the new year.

Valuation 52

Valuation Corporate Finance Finance Investments 52

Barry Ritholtz

MAY 9, 2023

He co-chairs a number of the asset management investment committees. So I interviewed with a bunch of banks, got a number of job offers by the end of the week, and joined Goldman Sachs in October 1998. I ended up being hired onto the high yield desk as a research analyst and did that for a number of years, a couple of years.

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Musings on Markets

JANUARY 27, 2021

Both oil and copper dropped during the peak crisis weeks (February 14 through March 23, 2020), but while copper not only recouped its losses and was up almost 26% over the course of the year, oil remains more than 20% below the start-of-the-year numbers. Data Update 4 for 2021: The Hurdle Rate Question.

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Currencies Investments Marketing Treasury 52

Musings on Markets

JANUARY 5, 2024

The numbers that I computed opened my eyes to how much perspective on the high, low, and typical values, i.e., the distribution of margins, helped in valuing the company, and how little information there was available, at least at that time, on this dimension. Aggregate operating numbers 3. Insider, CEO & Institutional holdings 2.

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Musings on Markets

AUGUST 15, 2023

As the risk-free rate rises, expected returns on equities will be pushed up, and holding all else constant, stock prices will go down., and the reverse will occur, when risk-free rates drop. In a reflection of the times, there have been two developments.

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Investments Currencies Treasury Hurdle Rate 83

CFO News Room

JANUARY 7, 2023

Mean reversion : I am not a knee-jerk believer in mean reversion, but the tendency for numbers to move back towards averages is a strong one. Counter made-up numbers : It remains true that people (analysts, market experts, politicians) often make assertions based upon either incomplete or flawed data, or no data at all.

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Musings on Markets

JANUARY 20, 2021

In the picture below, I use this process to estimate an equity risk premium of 4.72% for the S&P 500 on January 1, 2021: Download spreadsheet to compute ERP It is true that my estimates of earnings and cash flows in the future are driving my premium, and that the premium will be lower (higher) if I have under (over) estimated those numbers.

Treasury 52

Treasury Investments Valuation Hurdle Rate 52

Musings on Markets

MARCH 8, 2023

The dividend principle, which is the focus of this post is built on a very simple principle, which is that if a company is unable to find investments that make returns that meet its hurdle rate thresholds, it should return cash back to the owners in that business.

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Hurdle Rate Corporate Finance Investments Finance 94

Barry Ritholtz

FEBRUARY 21, 2023

We’ve always been a virtual company, just used to be through the mail and 1-800 number when I joined. So that’s a number I hadn’t seen before. Number one, you put it back into the business. That means a low hurdle rate. And straight up, the number is huge. BUCKLEY: Yeah. We’re 99.97

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Leadership Investments Profit and Loss Technology 111

CFO News Room

NOVEMBER 8, 2022

” look at the Monte Carlo simulations, look at what is the hurdle rate. The plan update process for you, it’s not just that the numbers move because a year has gone by and the markets did what they did and you saved what you saved, you withdrew whatever you were going to withdraw. Cean: We actually use J.P.

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Musings on Markets

JANUARY 6, 2023

Mean reversion : I am not a knee-jerk believer in mean reversion, but the tendency for numbers to move back towards averages is a strong one. Counter made-up numbers : It remains true that people (analysts, market experts, politicians) often make assertions based upon either incomplete or flawed data, or no data at all.

Valuation 52

Valuation Corporate Finance Financial Analysis Leverage 52

Barry Ritholtz

NOVEMBER 25, 2024

Honest back testing, really looking at the numbers versus exaggerating returns and, and making up the claim that something’s live when it’s not. 12, 14 even that not a lot of numbers. So you’ve got, you’ve got a modeling hurdle rate that you need to figure out when you’re adding diversifiers.

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Leverage Investments Marketing Math 52

Musings on Markets

JANUARY 9, 2021

In closing, I also want to dispense with the notion that data is objective and that numbers-focused people have no bias. Finally, it is worth noting that, notwithstanding the travails of last year, the number of firms in the data universe increased from 44,394 firms at the start of 2020 to 46,579 firms, a 4.9%

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Valuation Currencies Numbers Corporate Finance 52

Musings on Markets

FEBRUARY 27, 2023

Furthermore, do they optimize they debt ratios to deliver the lowest hurdle rates. Looking at 2022, the most striking aspect of the time series is that there is almost no discernible change in delinquencies or defaults in the year, with both remaining at the low rates that we have seen for much of the decade.

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Corporate Finance Finance Marketing Leverage 52

Barry Ritholtz

NOVEMBER 8, 2022

So, you’ll see that in this sort of what you might call a proto capitalistic society, interest is serving a number of different important functions. And my reason for getting back to that point is to try and underline how important the function of interest is.

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Musings on Markets

JANUARY 28, 2024

In particular, there are wide variations in how risk is measured, and once measured, across companies and countries, and those variations can lead to differences in expected returns and hurdle rates, central to both corporate finance and investing judgments.

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Musings on Markets

JULY 25, 2023

The graph below shows the sovereign CDS levels, by country: Source: Bloomberg ( July 2023 data ) There are three things to note, as you browse these numbers. That said, there is no intellectual firepower or research behind these numbers, since I am letting the default ratings agencies and risk measurement services carry that weight.

Currencies 52

Currencies Hurdle Rate Valuation Marketing 52

Barry Ritholtz

MAY 21, 2024

So it’s got this math angle where it, you know, it’s all numbers, but then there’s this behavioral angle and psychological angle where, you know, it’s, it’s kind of a fun problem to tackle. It’s kind of a silly number, but people are going to think you’re smart or dumb based on that number.

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Finance Marketing Numbers Investments 59

Barry Ritholtz

DECEMBER 26, 2023

And 00:06:38 [Speaker Changed] Door number one was much better than door number three in, in the circumstances. When we talk about breadth, we’re talking about the numbers of advancers versus decliners. So it’s like, yeah. It, it’s, it’s a totally, it’s, it’s very different.

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Musings on Markets

JULY 24, 2024

Country Risk in Business Most corporate finance classes and textbooks leave students with the proposition that the right hurdle rate to use in assessing business investments is the cost of capital, but create a host of confusion about what exactly that cost of capital measures.

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