ReSolve Riffs with Rafael Resendes on Fundamental Flaws with Quantitative Value

The prospect of normalizing monetary policy has been the main catalyst for a major equity rotation that has favored value stocks. Could this be the long-awaited reawakening of value investing? We had the pleasure of speaking to Rafael “Rafa” Resendes, co-founder of Applied Finance and prominent value investor. Our conversation covered: Economic ValueTM as a core metric The power of the Investment Factor The importance of capitalizing R&D and other balance sheet adjustments Sensitivity analyses – recognizing how impactful assumptions on growth and cost of capital can be for valuations Risks that cannot be diversified away must offer higher returns Why CAPM doesn’t make sense, both empirically and logically A market implied approach to cost of capital Leverage and size matter (a lot), though the former even more than the latter Taking advantage of historic mis-pricings Multiples, profitability, risk and competition The relevance of a company’s cash flow duration, and how it relates to interest rates Balancing risk vs duration Intrinsic value and asset pricing models Valuation as measured by implied future growth   Thank you for watching and listening. See you next week.   This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management.   *ReSolve Global refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global is a registered person with the Cayman Islands Monetary Authority.