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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (7086)	5/8/1999 6:59:00 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78462

Mike, am I understanding that you are making EVA calculations about a company to identify 'fair value'? If so, then I want to say I use EVA info. differently. I'm more interested in those companies that have signed on with Stern Stewart and so commit to manage their business with EVA in mind. (Or,if not these original EVA guys, at least in a similar EVA-type outlook.) There's some evidence that such companies do better (stockwise) than their peers who do not manage by EVA (The study(studies) which prove the method are often developed and reported by Stern Stewart -g-). Still, companies using EVA as a driver makes logical sense to me. I consider it a plus when trying to evaluate whether to purchase a company stock. Paul ps. There's an EVA thread on SI but it's dormant.

To: Michael Burry who wrote (7086)	5/8/1999 11:03:00 PM
From: Bob Rudd	Respond to of 78462

I looked at research from various sources and found little evidence to support the idea it outperforms other valuation measures like growth in EPS, PE, ROA, ROIC etc that are a helluva lot easier to calculate. High EVA alone just doesn't do it...probably already in the stock price. If a company exceed EVA expectations, it should bounce, but there's no First Call or Zacks offering concensus EVA and brokers that calculate it often differ somewhat on method used. From one article: <<In recent studies, Merrill Lynch quantitative research director Richard Bernstein evaluated four stock-selection strategies based directly or indirectly on EVA. His conclusion: While EVA is an important tool for corporate managers, it's hardly a stock-picking panacea. Portfolios built on the four EVA-related strategies he tested generally did not outperform other strategies based on plain old earnings growth.>> and <<If you're still interested in adding EVA to your arsenal of stock-selection tools after all that, understand that calculating EVA isn't an exact science, either. Stern Stewart offers about 160 "adjustments" to its basic EVA formula, from which users typically choose a handful. That means one broker's EVA calculation could easily differ from that of another -- or from yours. Merrill Lynch's EVA spreadsheet includes 150 to 200 lines per company. >> Nuff said On the other hand, If you can determine that a co is about to start using EVA as an internal management tool....before the rest of the market is aware of this, you might capture a bit of a gain. The idea has a following. Best Buy bounced about 10% when they announced they were going to use it. Like most news releases though, it's tough to beat the market to the punch. EVA is a known plus, I'm not sure the info has a tail effect beyond the initial bounce....haven't looked at that.