Following up on yesterday’s post, we can use the same logic we applied to assessing whether a stock is “good” or “bad” to a more segmented rating approach, like grading stock metrics as an A, B, C, D, or F. Let’s consider a simple distribution of the five letter grades:
If we use the EM100 to bucket stock P/E ratios such that thresholds are defined by how many stocks are above or below some level over thirty years, we get the following cutoffs:
We can then look at detailed indicators such as how many stocks are rated A over time:
Basically, if good or bad is too simple, we’ve got other options to rate a stock!
Good Stuff I’m Reading
How People Think
“So many behaviors are universal across generations and geographies. Circumstances change, but people’s reactions don’t. Technologies evolve, but insecurities, blind spots, and gullibility rarely does.”
10 Lessons from Great Businesses
“What makes a business great? Where is the magic in this machine? What makes it special?”
The SEC climate rule: 7 things investors need to know
“The SEC on Monday unveiled a proposal to expand the climate-related disclosures that companies make. Officials think it will help investors make more informed decisions. If adopted, the rule could directly impact individuals who buy company stock and corporate bonds. It may indirectly affect investors in mutual funds and ETFs, pensioners and society more broadly.”
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