What We’re Reading

Humility:

A new study accepted for publication in the Strategic Management Journal found that analysts tend to significantly underestimate the earnings potential of companies run by humble chief executive officers. That leads to artificially low earnings forecasts from the analysts, which the firms can then more easily meet or beat.

Alternative assets:

We find that LEGO investments outperform large stocks, bonds, gold and other alternative investments, yielding the average return of at least 11% (8% in real terms) in the sample period 1987-2015. Small and huge sets, as well as seasonal, architectural and movie-based sets, deliver higher returns. LEGO returns are not exposed to market, value, momentum and volatility risk factors, but have an almost unit exposure to the size factor.

Demographics:

The percentage of people in the U.S. aged 25 to 54 who are employed or actively looking for work has climbed to the highest in a decade as demand in the health-care and education sectors lures more women into the workforce.

Productivity:

Last summer, Microsoft Corp. conducted an experiment in Japan. In a country where people put in long hours, the U.S. software company gave its employees five consecutive three-day weekends. Astonishingly, Microsoft’s sales per employee soared by 40% from the previous year. The company also saved money on electricity bills and paper-copying costs.

Dividends:

We look around us and imagine that today’s largest corporations will always be with us, but that simply isn’t the case. That brings me to my second key point: We should want companies to return cash to shareholders—and preferably lots of it.

Turnover:

Homeowners nationwide are remaining in their homes typically 13 years, five years longer than they did in 2010, according to a new analysis by real-estate brokerage Redfin. When owners don’t trade up to a larger home for a growing family or downsize when children leave, it plugs up the market for buyers coming behind them.

Have a good weekend.


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