Share repurchase and dividends are considered by corporations as a means of returning benefit to shareholders. Companies in the S&P 500 currently appear to be fairly valued based on a combination of dividend yield and the funds flowing to share repurchase (5.3% of the market capitalization — in line with historical averages). However, given their exceptionally strong cash position (13.8% of net worth) and low payout ratio (37% vs. the historical average of 58.7%), there exists a strong potential for an increase in funds allocated to shareholder rewards.
Read more: Investment Commentary (PDF)
The EquityCompass model that identifies stocks mispriced as a result of investor over-/underreaction has been generating strong returns since its inception in 2002 (outperforming the equally weighted S&P 500 by 5.9%Â on an annual basis) and is an integral part of the investment process behind the numerous portfolio strategies and stock lists we provide.
Read more: Portfolio Manager Insights. (PDF)
The EquityCompass indices measure the performance of stocks with extreme investment characteristics. Monitoring for extreme conditions is insightful for understanding performance trends and outlier market conditions. The indices represent 50 stocks from the EquityCompass universe of over 3,000 stocks that meet the specified investment characteristic: either mega (i.e., greatest) or micro (i.e., least).
Click to view: EquityCompass Performance Monitor - July 2010 (PDF)
The Update & Review is our monthly publication that provides commentary, analysis, and investment insights for stock selection and portfolio management.
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