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Winning at Active Management : The Essential Roles of Culture, Philosophy, and Technology (Hardcover)
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Priest and Keefe believe free cash flow measures will gain even more currency in the next decade due to the nature of sources of the returns available from the equity markets. Equity returns can be decomposed into three principal components: dividends, growth in earnings per share, and valuation, that is, changes in the price/earnings ratio. (A fourth minor component, which we call "combined effects," is made up of the interaction of the first three.) Dividends always make positive contributions to equity returns, and earnings per share growth also adds to returns over long periods (and typically over short periods as well). However, the contribution from changes in price/earnings ratios can vary widely, enhancing equity returns in some market regimes and eroding them in others.In this book you will learn:
- The practical applications of the free cash flow framework, successfully practiced by Epoch Investment Partners over the last 10 years, examining historical equity market returrns and showing the superiority of the techniques to traditional methods derived from accounting-based earnings measures.
- The lessons excerpted from the investment perspectives published by Epoch Investment Partners between 2004 and 2014.
- The equity market cycles and the relative importance over time of key macroeconomic and corporate themes. For example, following the 2008 financial crisis, global equity markets went through successive "risk-on" and "risk-off" periods when investors temporarily rewarded companies with weak fundamentals and poor records at investing and distributing corporate cash flow. The objective is to show how contrary the equity markets can sometimes become, but that over the long term, investors reward companies for wise investment in their business and appropriate approaches to returning capital to the owners of the business (i.e., the shareholders). A second example would illustrate the recurring mistakes investors have made in financial stocks, and how stock selection according to cash flow methodology helps identify the best performers and highlight the fundamental weaknesses in other companies.
- The measures taken by banks to rescue the global economy, and the tectonic shifts in the financial markets since 2008. We will also look ahead to the unwinding of quantitative easing and its likely effects on the equity market in general, and link back to how investing through a free cash flow approach will be crucial in managing equity portfolios.
Number of Pages: 306
Genre: Business + Money Management
Publisher: John Wiley & Sons Inc
Author: William W. Priest & Steven D. Bleiberg & Michael A. Welhoelter & John Keefe
Street Date: July 25, 2016
Item Number (DPCI): 248-20-3308
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