Investing 101: Ignore the Headlines, Jonathan Greenberg of OCE Interactive Advises in Forbes Blog

NEW YORK, Aug. 19 /PRNewswire/ -- You would have underperformed the stock market by a wide margin this summer if you bought and sold based on headlines, according to Jonathan Greenberg, CFA, president and CEO of OCE Interactive, in his article titled "Investing 101: Ignore the Headlines" on his blog on Forbes.com.  OCE specializes in systematic and expectations research and is the developer of the Market Topographer® (www.markettopographer.com) Web-based platform for researching, benchmarking and comparing the valuation of U.S. stocks.

Greenberg, who writes for the Forbes Great Speculations blog, noted that market headlines in recent weeks touted the rally in July, then questioned whether it was real, and then expressed rising concerns about deflation.

"When is the last time you saw a headline that simply read 'Stock Market Rises 100 Points – No Identifiable Catalysts'?" he wrote. "Headlines are notoriously more volatile than the stock market itself, as they are typically driven by short-term surface level market movements and the need to provide something attention-grabbing."

Based on OCE's analysis using his firm's Market Topographer benchmarking platform, Greenberg concluded that the rise in the market from July 1 lows appears to have been more attributable to the correction of an oversold market than a rejuvenation of the rally.  He outlined the actual factors which have been driving the market.

The market continues to show risk aversion.  "You can see this in the outsized premium the market continues to afford stocks sporting high dividend payout ratios and low financial leverage – both above 20-year averages – and the historically low differentiation it is assessing based on Wall Street's expected long-term earnings growth rate," Greenberg wrote.

In addition, earnings continue to be dominated by inventory restocking rather than the consumer purchases necessary for a recovery to be sustainable.  And recent surveys suggest institutional investors are becoming increasingly concerned about economic deceleration and the possibility of deflation.

"Aversion to financial leverage and most notably, the market's strong preference for the safety of dividends despite a likely increase in taxes on dividends around the corner, sure seem to suggest the market could be preparing itself for such a scenario," Greenberg said in his piece.  

"If past experience is any guide, a sustainable rally will ultimately be accompanied by a renewed preference for growth vs. dividends and less aversion to financial leverage," he wrote.  "And for that to happen, we will need to see renewed signs that the economic recovery is once again regaining steam or at least indications that the deceleration has once again floored."

Greenberg suggested investing with caution over the next couple of months and studying closely the type of stocks that are rising or falling.

"And certainly do yourself a favor.  Whatever you do, don't invest based on the headlines," he concluded.

About OCE Interactive

OCE Interactive is a financial services firm specializing in systematic and expectations research and the developer of Market Topographer® (www.markettopographer.com), a platform for researching, benchmarking and comparing the valuation of U.S. stocks.  Market Topographer combines systematic and expectations research to help investors, advisors, bankers and analysts rationalize a company's valuation with the current and past experience of other companies and the marketplace.  OCE also provides customized research and consulting services for both the buy side and sell side.  OCE was founded in 2003 by a team of former bulge-bracket investment bankers, who spent more than six years developing the Market Topographer platform with the goal of bringing risk management more directly into the valuation process.  Currently, the company has six patents pending on its technology and an extensive pipeline of additional tools for equity valuation and mergers and acquisitions practitioners.  The company is based in New York.

SOURCE OCE Interactive