Does CAPE Work on Stocks?

My buds Wes Gray and Jack Vogel  just put out a killer new paper where they asked the above question.  The simple answer is “yes it does”.

The more interesting answer is 1) there are other cyclically adjusted measures that work better and 2) there is some other factor (you know I like) that reaaaalllly gets the returns flowing.  Our friends at O’Shaughnessy should like this one too.

Enjoy!  (and if you email Wes please shame him for canceling on our Morningstar panel at the ETF conference next week!)

 “On the Performance of Cyclically Adjusted Performance Measures” 

Below is a summary of the 20 cheapest S&P500 companies with positive values CAPES all under 10 from

LyondellBasell Industries NV LYB Basic Industries Major Chemicals
Cliffs Natural Resources Inc CLF Basic Industries Precious Metals
Citigroup Inc C Finance Major Banks
General Motors Company GM Capital Goods Auto Manufacturing
United States Steel Corporation X Basic Industries Steel/Iron Ore
J.C. Penney Company, Inc. JCP Consumer Services Department/Specialty Retail Stores
Bank of America Corp BAC Finance Major Banks
Apollo Group Inc APOL    
Alcoa Inc AA Capital Goods Metal Fabrications
Pitney Bowes Inc. PBI Miscellaneous Office Equipment/Supplies/Services
Franklin Resources, Inc. BEN Finance Investment Managers
Morgan Stanley MS Finance Investment Bankers/Brokers/Service
Marathon Oil Corporation MRO Energy Oil & Gas Production
Valero Energy Corporation VLO Energy Integrated oil Companies
Frontier Communications Corp FTR Public Utilities Telecommunications Equipment
Altria Group Inc MO Consumer Non-Durables Farming/Seeds/Milling
Exelon Corporation EXC Public Utilities Power Generation
Dell Inc. DELL Technology Computer Manufacturing
SunTrust Banks, Inc. STI Finance Major Banks
Peabody Energy Corporation BTU Energy Coal Mining


PS this is another wonderful resource from Wes at his Turnkey Analyst site…sort of like the FF data resource…