One final post based upon 2010 data. I have been interested in emerging markets, in general, and the challenges of valuing companies in these markets, in particular, for a long time. When I started on this endeavor in the 1990s, the fault lines between developed and emerging markets were stark and could be categorized on the following dimensions:1. Financial markets versus Economy: In emerging economies, financial markets were a very small and unrepresentative sampling of the underlying economy. Thus, the bulk of the market capitalization in most emerging markets came from recently privatized...
Time to Split!!
As many of you are probably aware, Berkshire Hathaway has announced its intent to split its class B shares and the requisite "deep analysis" of whatever Buffet is doing has journalists chasing the story.http://money.cnn.com/2009/11/06/markets/thebuzz/index.htmSince Berkshire is not the first company to ever split its stock, it is worth looking at key questions that come up anytime there is a stock split.1. Do companies split their stock often?The answer is yes and no. Some companies are serial stock splitters, splitting their stock at regular intervals. Other companies let their stock ride. In...
Bounceback in Multiples: The 2010 story
Building on the 2010 data, here is the other side of the data. As risk premiums have reverted back to pre-crisis levels, we are also seeing multiples also revert back to pre-crisis levels. This can be seen on a number of measures, both in the US and globally:a. Price Earnings Ratios (PE): The median current PE ratio for US stocks, which plunged from about 19 in January 2008 to about 9 in January 2009, is now back to almost 15. Similar shifts have occurred in the trailing and forward PE ratios and in most sectors.b. EV/EBITDA: The median EV/EBITDA multiple for US companies, which had dropped from...
Reversal in Risk Premiums (or premia): The 2010 story
The big story from the 2010 updates is that that risk premiums across the board have reversed the rise that we saw during the crisis. The broad based nature of the shift can be seen by looking at the following:a. Equity Risk Premiums: I have been tracking the equity risk premium at the start of every month since the start of the market crisis on September 12, 2008. On that day, the equity risk premium for the US was 4.37%. That number exploded to almost 8% in November 2008 and settled in at 6.43% at the start of 2009. In the first three months of 2009, the equity risk premium continued to rise...
Data Update for 2010
If you have been tracking my website, you probably know that I maintain updated datasets for companies around the globe, classified by region (into the US, Emerging Markets, Europe and Japan). I report summary statistics on risk (beta etc.), profitability measures (margins and accounting returns) and debt/dividend measures for industry groups in each region.I update the data at the start of every year and I have just completed the data update for January 2010. You can get the data by going to:http://pages.stern.nyu.edu/~adamodar/New_Home_Page/data.htmlI have added two new datasets this year -...
