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Recent Insights

March 7, 2023

When interest rates were near zero it was easy for companies to borrow and for investors to overlook debt. But as interest rates increase, the amount of debt held by a business can become a significant refinancing risk for the company and investment risk for investors. Hello and welcome back to Reflections on Investing with

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February 21, 2023

How can an option trade make 4000% in one day? Tesla stock has been highly volatile and one of the drivers of this volatility is the unusually large volume of options trading. Are large proportion of Tesla option contracts are traded on the day of expiration (zero DTE) and just out of the money. This

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February 8, 2023

While 2020/2021 were great years for our High Fliers, in 2022 the party ended and many of those companies like Peloton, Wayfair and Carvana came crashing down.  In the first month of 2023 however we are seeing signs that the worst may be over for the High Fliers. For many of these companies January of

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January 2, 2023

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

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November 22, 2022

We revisit “Valuing The Automotive Industry” our in depth report from last year. “Valuing The Automotive Industry” (Nov. 2021)

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Featured Publication

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

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