Asset Class Selection and Allocation are Determined by Relative Valuation Analysis
Key Investment Principle #6
- Relative Valuation Analysis (RVA) is a quantitative mathematical model for evaluating which asset classes are undervalued, fairly valued, or overvalued at any time.
- The Alphareturns Portfolios are constructed to maximize the investment allocations for undervalued asset classes and avoid overvalued asset classes.
- RVA uses global economic research to estimate the relative value of various asset classes at the present time and the potential for this relative value to revert to the mean.
- Rank market geographies by real GDP growth, inflation, and interest rates.
- Ranks stock sectors by price to book, price to earnings, price to sales, debt to equity, return on equity, and price to cash flow.
- Rank commodities by supply and demand as well as denominated currency strength.
- Rank fixed income based upon credit quality, maturity, real yield, and currency strength.
- Rank REIT’s by FFO (Funds From Operations), price to earnings, price to book, price to cash flow and debt to equity.