Mebane Faber Global Stock Valuation Wine Country Conference May 2014

Click to edit Master title
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Click to edit Master subtitle style Investment Management
for High Net Worth
Individuals and Institutions

Global Stock Valuation
Wine Country Conference, May 2014
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Disclaimer
This presentation is for informational purposes and is not an offer to sell. Any investment involves significant risks, and
past market conditions may not resemble future market conditions.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE
DESCRIBED BELOW. THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT, DO NOT
INVOLVE FINANCIAL RISK OR REFLECT ACTUAL TRADING BY ANY ACCOUNT UNDER ACTUAL MARKET
CONDITIONS AND THEREFORE DO NOT REFLECT THE IMPACT THAT ECONOMIC AND MARKET FACTORS
MAY HAVE HAD ON THE ADVISORS INVESTMENT DECISIONS FOR THAT ACCOUNT. NO
REPRESENTATION IS MADE THAT CIMI'S PERFORMANCE WOULD HAVE BEEN THE SAME AS SUCH
SIMULATED HAD CIMI BEEN IN EXISTENCE DURING SUCH TIME. ANOTHER LIMITATION IS THAT
INVESTMENT DECISIONS REFLECTED IN THE SIMULATED RESULTS CANNOT COMPLETELY ACCOUNT
FOR THE IMPACT OF FINANCIAL RISK ON THE MANNER IN WHICH AN ACCOUNT WOULD HAVE BEEN
MANAGED. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR
TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO AFFECT
ACTUAL TRADING RESULTS. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN
HYPOTHETICAL RESULTS AND THE ACTUAL RECORD SUBSEQUENTLY ACHIEVED. THE SIMULATED
RESULTS DO NOT TAKE INTO ACCOUNT ENHANCEMENTS THAT MAY BE MADE TO THE PROPRIETARY
COMPUTER MODELS OVER TIME. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKET
IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE
FULLY BE ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL SIMULATED PERFORMANCE
RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS. ALL RESULTS ARE
GROSS OF ALL TRADING AND MANAGEMENT FEES

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Market Research
4
Blog Website

MebFaber.com CambriaFunds.com

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Free Books!

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Movie Follow Up
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Talking about Investing

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1993-2012
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Emotional Investing
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Can we do anything to
remove emotional
decision making?
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Cyclically Adjusted Price Earnings Ratio
Source: Shiller
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Source: Shiller
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Source: Shiller
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REAL RETURN CAPE

10 BEST 16.1% 11

10 WORST -3.3% 23
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Source: Shiller
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Common Criticisms
Measurement period is too long

Ignores depressions (or bubbles)

Reported vs. Operating Earnings

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Either you understand your risk or you dont play the game.
- Arthur Ashe

Source: Global Financial Data
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So, the US is expensive
and bonds yield very
little, where to look?
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Does it work in all markets?
Source: Global Financial Data, MSCI, Bloomberg
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Bloodand Bubble.
1 Year 3 Year 5 Year
Blood <7 31% 18% 21%

Bubble >45 -9% -4% -1%
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Where are we now?
Greece 4
Argentina 6
Russia 6
Hungary 8
Ireland 9
Italy 9

Malaysia 20
Colombia 22
Philippines 24
USA 25
Indonesia 28
Denmark 29

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Why This Matters (to You!)
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Other Ideas
Does this work with sectors?

Would an ensemble model of value
factors work better?

What about adding momentum,
trend, or other factors?

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CONTACT

WEBSITE
www.cambriafunds.com

PHONE
(310) 606-5555

BLOG
www.mebanefaber.com

EMAIL
mf@cambriainvestments.com

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Other Value Factors Work, 1975-2011
Source: French Fama
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1982-2011
Source Gray
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From Macro to Micro
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Source Shiller
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Source Shiller
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Source Gray, Shilller
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Source Shiller
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Source Shiller
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When the facts
change, I change my
mind. What do you
do sir? - John
Maynard Keynes
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1. Cash Dividend
2. Buyback Stock
3. Pay Down Debt
4. Acquisition
5. Reinvest in Business

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Source Fama
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Source Damodaran
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Buffett
When companies with outstanding
businesses and comfortable financial positions
find their shares selling far below intrinsic
value in the marketplace, no alternative action
can benefit shareholders as surely as
repurchases.

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Source Schwartz

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1. Cash Dividend + Net Buybacks =
2. Net Payout Yield

3. Cash Dividend + Net Buybacks + Debt Paydown =
4. Shareholder Yield

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Source Gray
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One More Reason to be Wary of High Dividend
Stocks

1927 2012

Excess Return During 16 Periods of Rising Rates

Dividend Excess Return -2.6%
Shareholder Yield 1.5%

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Two More Reasons to be Wary of High
Dividend Stocks

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Cambria Funds
Active and Passive ETFs
Shareholder Yield (SYLD)
Foreign Shareholder Yield (FYLD)
Global Value (GVAL)
.more to come!

Mebane Faber Global Stock Valuation Wine Country Conference May 2014

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