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In my third post at the start of 2023, I looked at US treasuries, the long-touted haven of safety for investors. In 2022, they were in the eye on the storm, with the ten-year US treasury bond depreciating in price by more than 19% during the year, the worst year for US treasury returns in a century.
Consider, for instance, an investor who picks stocks based upon price to book ratios, who finds a stock trading at a price to book ratio of 1.5. buy stocks that trade at less than bookvalue or trade at PEG ratios less than one) for individual stocks.
With these characteristics, the accounting balance sheets for these companies will be identical right after they start up, and the bookvalue of equity will be $60 million in each company. The first is that if markets are efficient, the price to book ratios will reflect the quality of these companies.
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