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Hi All,

I am unable to access the old MI Search boards (I think they are being replaced but I have apparantly not tracked the replacement). A long while back, Mungo posted a method to value QQQE, something about median price per sales or something like that from the 100 stocks.

I am thinking that this would make a good strategy somewhat like the one he posted in #4021 for playing with BRK-B, and was interested in modeling it and giving it a try.

(1) Does anyone have a link or text of the original post for valuing QQQE?
(2) Is anyone else interested in this?

Thanks, Gabriel.

Consider median earnings yield for QQQE. Links:

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"I track the trend earnings of QQQE.
So, my fair value estimation process goes like this:
Calculate the earnings yield each day through time. ..."
https://yorickm.com/Message.php?pid=35139523

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"1-What is the metric you use for QQQE? (price ratio?)
...
So, the earnings yield is the best place to start.

Since it`s 100 companies equally weighted, the median earnings yield is a good approximation of what is going on.
It is much more numerically stable than the average or sum, because it isn`t affected by wild outliers. ..."
https://yorickm.com/Message.php?pid=35128797

====================
"Speaking of returns from an index...

FWIW, I note that the Nasdaq 100 Equal Weight index is quite a bit cheaper than usual these days using trailing earnings yields as a yardstick.
The median firm is 16% cheaper than average since 1997, the average firm 26% cheaper than usual.
On a median day since 1997, the median earnings yield was 3.91% (P/E 25.6), or 4.24% (P/E 23.6) starting 2003 after the tech bubble was bust.
Right now it`s 5.22% (P/E 19.1).
On that metric, it has been cheaper only 15% of the time since 1997 or 20% of the time since 2003.

Looked at on a relative basis, it also looks good.
The earnings growth rate has been reliably much higher in the Nas100 than among the S&P 500 since the tech crunch, so they should rationally trade at a solid premium.
Again, based on median trailing earnings yield:
Usually the Nas 100 firms are ~30% more expensive than the S&P 500 ones on trailing earnings yield, but right now it`s a premium of only 10%.

If somebody held a guy to my head and said I had to be long an index fund, it would probably be QQQE at $41.52."
https://yorickm.com/Message.php?pid=34101125

There may be other saved copies of old posts.

"I saved a copy of nearly all of it, on a lark around 2010, and recently dusted it off. Not quite sure what to do with it yet, but I consider it public domain. To be clear, I have something like 18 mil posts saved from a ~2010 vintage, and just want you to know, if you think you lost anything important, I can probably get it back for you. I am never really around here but you can find me on FB."
"I started a TMF message boards refugees group on FB a while back to share my progress on this pet project." whafa
https://discussion.fool.com/t/seriously-all-the-ol...

The method goes like this:

Since the QQQE fund is equally weighted, the median earnings yield among those stocks is basically the same as the average, except in the case that there is a very wild outlier, in which case you want to ignore that...so use the median.

So I calculated the median earnings yield among the 100 Nas100 stocks for every day in the last 30-or-so years.
Multiplying by the price-only index level for the equal weight index in the same stretch, that gives you the index's earnings level for each day. Adjust that data series for inflation. Other than transient dips in recessions, the real earnings figures form an astoundingly straight line.

Fit a trend line through that to get a formula for the "normal real earnings for today". Given that, and today's equal weight index level, you get an idea of what the "on trend" earnings yield is today.
Compare that to the historical average earnings yield, and you get an idea of today's over- or under-valuation.

Last time I updated that calculation was a while ago, October 2023. I estimated value of QQQE at around $62-72 if it were trading at the "usual" multiple of on-trend earnings. That earnings figure rises with inflation (5.2% since then), and with time as the trend real earnings level is expected to rise (around inflation+8%/year). Combined, that would push the estimated fair value up around 21% to maybe $75-87 today. With QQQE at $98.16 now, it seems to be 12-30% more overvalued than historically typical. Best guess maybe 24% higher than usual / usual valuation level today $64.

I did that really quickly, so don't bet the rent on its precision.

Bottom line: unsurprisingly, QQQE certainly does not appear to be cheaper than usual today. But if the trend of earnings holds up in future years, it's not nearly as overvalued as the S&P 500 is (equal weight or not) using the same sort of logic.

Jim

Best guess maybe 24% higher than usual / usual valuation level today $64.

Ooops, horrible typo.

Should read:
Best guess is that today's price for QQQE is maybe 24% higher than usual, so the usual valuation level today might be around $78.

Jim

Thanks everyone (especially Jim),

Now I need to take a look at how to generate these numbers using GTR1 (there seems to be a thread where you did it), but it is somewhat lost to the pre-Shrewd days.

For step0, I have: nas100.a != null (to select the nasdaq 100 stocks)

I'll pull down the latest version of the GTR1 helper and see if I can go from there.

Thanks, G.

"When we see days like these, where 90% of the volume on the NYSE is higher, and 90% of all stocks are in the green, it tends to be bullish for the next 12 months of gains....

The last 90/90 day was April 9th of this year, when we had a 90-day pause on Tariffs. The S&P 500 is up 29.8% since then; the Nasdaq 100 has gained 37.5%.

Since 1982, we have seen one negative, one flattish, and 12 positive sets of returns over the 12 months that followed a 90/90 day. It’s not a guarantee, but it suggests favorable odds for remaining constructive." Barry Ritholz

"I started a TMF message boards refugees group on FB a while back to share my progress on this pet project." whafa

Good to see the whafa is still alive and ticking.

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