Download Memo as PDF Retrospective As 2021 came to an end, the stock market party was going strong. The S&P 500 index closed at 4766.18 up 1,010 points or 26.9% for year to within a hair’s breadth of its all-time high. The Dow Jones (36,338) and the NASDAQ (15,645) indexes also closed near record highs. Most
The market’s worst day of 2022 was September 13th when the Bureau of Labor’s Consumer Price Index came in higher then expected. A month later the next CPI release was a similar surprise however the market’s reaction to that news was much different. Former Goldman Sachs CEO Lloyd Blankfein remarked: “This is one of those trading
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By Bradford Cornell, Shaun Cornell, Andrew Cornell Introduction An investor would have to have been living under a rock not to have noticed the appreciation in the value of automobile companies in the last two years. Tesla, of course, is the premier example. In less than two years, its market capitalization has soared from less than $100 billion to over $1.2 trillion at one point. But Tesla is hardly alone. Recent electric entrants like Xpeng, Nio, Rivian, and Lucid have all seen their valuations jump. Even traditional automakers like Ford, GM and Volkswagen saw their valuations rise when they announced electric vehicle plans. This across-the-board run-up is sufficiently unprecedented that it calls for a valuation analysis of the automotive industry. Are the price increases consistent with reasonable fundamental valuation – for all companies in the industry or just a small group? What are the investment implications? Before turning to the data and analysis, there is a key economic principle related to technological innovation and valuation that must be kept in mind. Specifically, a new technology does not translate into value creation for a company that adopts it unless it produces returns on invested capital (ROIC) in excess of the cost