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White Papers

January 30 2018 When “Bits” Meet “Atoms”

The Digital Age and the transition from “atoms” to “bits” implies a capital-light economy in which technology is being substituted for labor and physical assets. Its impact is widespread and stretches beyond the technology sector. In the third part of our technology focused series we explore:

  • The evolution of technology and why it is so noticeable today
  • The key differentiator between the first and second machine ages
  • Technology's impact on microeconomic factors such as demand and marginal revenue
  • Why the digital age entails a radical reevaluation of macroeconomics
  • Implications for investors
December 15 2017 The Winds of Change: The Transition from QE to QT

While regulators and many investors are focused on leverage, we are more concerned with liquidity risk, which was at the core of the 2007-2009 crisis and will likely be again at the next one. As central banks move toward "quantitative tightening," higher interest rates and waning liquidity are the most significant global macro risks, especially given that many assets are trading toward the high end of their historical ranges.

December 07 2017 What Do We Mean When We Talk About Value

It has long been common practice in the investment world to divide the market up into "value stocks" and "growth stocks." What do these labels really mean? "Value" connotes that the stocks in this category are undervalued, and should therefore outperform over time, while "growth" implies that these are stocks with faster earnings growth. We examined the Russell 1000 Value and Growth indices to find out if these broad categorizations true. That is, do value stock indices outperform consistently over time, and do growth stock indices experience faster earnings growth? Our findings may surprise you. 

August 10 2017 Tech is the New Macro Part II: Implications for Labor Markets and Productivity

Part I of our three part Tech is the New Macro series demonstrated how technology will be positive for all three components of ROE. In Part II, we explore the occupations most susceptible to disruption, new jobs that may arise from technology, the puzzling decrease in productivity growth and the effect technology has had on inflation.

June 29 2017 Tech is the New Macro: Impacting All Three Components of Return on Equity

The rapid expansion and implementation of technological innovation has become a key factor in the behavior of the economy and capital markets. In this paper, Investment Strategist Kevin Hebner and Co-CIOs Bill Priest and David Pearl explore how tech has become the new macro, including a look at how:

  • Tech is positive for all three return on equity (ROE) components
  • Profit margins have soared over the last two decades
  • Asset utilization improves with technology
  • Tech impacts leverage and payout ratios
  • Platforms and their network effects have resulted in a winner-takes-all market
  • Disruptive innovation will affect all economic sectors
May 16 2017 The Impact of Passive Investing on Market Efficiency

Passive ETFs have influenced the informational efficiency of the stock market: trading costs have risen, stocks are more correlated with each other than they used to be (reducing the ability of investors to control risk through diversification), and valuation is now partly affected by whether a stock is in a widely traded index or not. In response, we believe active managers need to focus more than ever on the free cash flow fundamentals that drive long-term value creation, and to invest over a long enough time horizon such that the distortions being introduced by passive trading play only a marginal role in the total holding period return.

In our latest paper, Portfolio Manager Steve Bleiberg and Co-CIOs Bill Priest and David Pearl explore in detail, the impact that passive investing has had on market efficiency and what active managers must do to in such an environment.

Steven Bleiberg, William Priest, David Pearl
December 15 2016 The Big Rewind

Bill Priest and Kevin Hebner discuss how president-elect Trump's economic policies could have a positive cyclical influence on earnings within the context of secular stagnation and higher interest rates putting pressure on valuation multiples.

William Priest, Kevin Hebner
October 06 2016 Free Cash Flow Works

Epoch's investment philosophy can be summarized by saying that it is the ability to generate free cash flow that makes a company worth something to begin with, and it is how management allocates that free cash flow that determines whether the value of the business rises or falls. In this paper, CEO and Co-CIO Bill Priest, Co-CIO David Pearl and Portfolio Manager Steve Bleiberg focus their attention on the first half of the statement, and ask two questions: 1) Why does free cash flow matter more than earnings in determining the value of a business, and 2) do free-cash-flow metrics help investors identify stocks that outperform the market?

William Priest, David Peal, Steven Bleiberg
September 14 2016 Secular Stagnation: “2% is the New 4%” for U.S. Growth

Over the last two years Lawrence Summers has been an energetic proponent of the secular stagnation thesis.He argues that this has occurred because of a chronic excess of savings over investment, an imbalance currently present in the U.S. and other developed markets. This framework posits that the increased propensity to save and the decreased predilection to invest acts as a drag on demand, reducing both growth and inflation, and pulling down real interest rates.

In this paper, Global Investment Strategist Kevin Hebner joins co-CIOs Bill Priest and David Pearl to explore the underlying components of Mr. Summers' thesis and their investment implications.

William Priest, David Pearl, Kevin Hebner
June 30 2016 The Capital Reinvestment Strategy

Return on Invested Capital (ROIC) is a crucial metric in evaluating companies, yet investors pay more attention to growth in earnings, which can be misleading. Companies increase their value when they earn a return on invested capital that exceeds the marginal cost of that capital. In this white paper, we outline the opportunity for investors to earn superior returns by focusing in a systematic way on harvesting the benefits of owning companies with high ROIC. Our Capital Reinvestment strategy — in many ways a mirror image of our Shareholder Yield strategy — focuses on companies that use their free cash flow to reinvest and acquire, and in doing so have a persistently high level of ROIC well in excess of their weighted average cost of capital.  

William Priest, Steven Bleiberg, Michael Welhoelter
May 17 2016 The Case for Trade Remains Overwhelming

International trade has moved to center stage in the U.S. political debate, with anti-trade tirades and protectionist rhetoric dominating stump speeches and media coverage. Against this backdrop, Co-CIOs Bill Priest and David Pearl join Investment Strategist Kevin Hebner to explore three key questions:

  • Why does trade matter so much?
  • Why has protectionism become such a prominent issue in 2016?
  • What are the economic and market implications if the protectionists prevail?
William Priest, David Pearl, Kevin Hebner
August 28 2015 Contagion — A Perspective William Priest, David Pearl, Eric Sappenfield
July 13 2015 Shareholder Yield: The Case for the Next Decade

The Shareholder Yield strategy is approaching its tenth anniversary. Since its inception it has established a strong track record. But with widespread expectations that the next ten years will be different, it is fair to ask: was this strategy simply right for the time? Or is it, as we believe, a core strategy, relevant for all times? In the attached white paper, we lay out the case for the relevance of the strategy in the coming decade. 

Eric Sappenfield, John Tobin, William Priest, Kera Van Valen, Michael Welhoelter
June 26 2015 The Case for Active Management, Continued: Epoch’s Investment Process William Priest, David Pearl, Steven Bleiberg, Michael Welhoelter
March 23 2015 The Case for Active Management

In our most recent whitepaper, we discuss the case for active management. The paper looks at the recent performance of active managers and then considers both the theoretical and empirical arguments.

William W. Priest, David N. Pearl, Steven D Bleiberg, Michael A. Welhoelter
January 21 2015 2015 Oil Outlook

One of the most important issues for investors in 2015 will be understanding the implications of the precipitous fall in oil prices. In our latest perspective, 2015 Oil Outlook, we provide a framework for thinking about oil prices and where they are headed.

John P. Reddan
January 05 2015 Dividends by Another Name

At Epoch, we invest in companies that we believe are good capital allocators. This means finding companies that have a track record of successfully investing free cash flow for profitable growth and  returning excess free cash flow to owners. If management does not have high-ROIC projects to pursue, including acquisitions, the "next best use" of that cash is to return it to the owners. We see dividends, share repurchases and debt pay-downs as equivalent ways to achieve that objective. With the benefits of share buybacks being questioned in the financial press, we thought the attached white paper would be of interest. 

William W. Priest, David N. Pearl, John Tobin, Eric Sappenfield
May 29 2014 The Power of Zero + The Power of the Word

Bill Priest, David Pearl and Ken Hightower outline how the “power of zero” (quantitative easing and ultra-low interest rates) and the “power of the word” (the most significant being Mario Draghi’s “whatever it takes” statement) have held sway over equity markets. The paper describes the perils and opportunities ahead as these influences wane. 

William W. Priest, David N. Pearl and Kenneth H. Hightower
July 01 2013 Sea Change — The End of ZIRP and the Beginning of “The Movie Run Backwards”

The Federal Reserve has signaled the end of quantitative easing in the U.S., conceptually if not tactically.  Bill Priest discusses the global implications of a higher discount rate on various financial assets in our new white paper.

William W. Priest
May 13 2013 Too Big To Ignore

Epoch has been wary of financials, particularly large banks, since before the financial crisis.  In the U.S., however, banks have recapitalized their balance sheets, reduced leverage, and have a greater level of transparency than in the past.  While revenue growth will likely be slow for as long as the yield curve remains suppressed, some now have the ability to generate excess capital and return it to shareholders.

David J. Siino and David N. Pearl
January 24 2013 Japan in 2013: New Dawn or Another False Start?

John Tobin, Bill Priest and David Pearl examine the outlook for Japan in our new white paper. They discuss whether the new fiscal and monetary initiatives will be effective and lay the ground work for sustainable long-term growth and why the portfolios we manage continue to remain underweight Japan.

John Tobin, William Priest and David Pearl
January 17 2013 Where’s the Value in U.S. Markets?

David Pearl and Ken Hightower outline what has been driving equity returns, how that is changing, and where we see opportunity.

David Pearl and Kenneth Hightower
November 12 2012 Locks, Stocks and Barrels of Money

Bill Priest and Ken Hightower examine how a monetary policy of financial repression has replaced fiscal policy and how this has been the catalyst for the recent period of unusual equity returns.

William W. Priest and Kenneth N. Hightower
August 23 2012 Our Thoughts on the Euro Crisis

It’s difficult to have an opinion on markets or specific stocks without having a view on the future of the euro. We outline three possible scenarios, our expectations, and the investment implications.

William W. Priest, Eric Sappenfield and John Tobin
June 25 2012 Investment Opportunities in a World of Hurt

Bill Priest examines the difficulties facing the euro and how excessive government debt is taking a toll on GDP growth globally. This will leave equity strategies focused on the expansion of P/E multiples at a disadvantage to those that emphasize companies growing their cash flow, returning capital to shareholders and taking intelligent advantage of globalization.

William W. Priest
April 18 2012 Earning the Return: Are Global Income Oriented Stocks a Crowded Trade?

Are dividend-oriented investments a “crowded trade?” Valuations and interest rates can be interpreted differently, but in the end, high-quality companies with growing cash flows that consistently return capital to shareholders earn their return.

Kenneth N. Hightower, William W. Priest, Eric Sappenfield, Michael A. Welhoelter
November 10 2011 Dividends: Beautiful, and Sometimes Dangerous

Dividend strategies are regaining popularity. But pursuing dividend yield alone can lead to poor results. Investors need to understand a company’s sources of cash and should view cash dividends, share buybacks and debt repayments collectively in assessing management’s strategy to create shareholder value.

William W. Priest, Eric Sappenfield and Michael Welhoelter
August 08 2011 The Road to Perdition?

Bill Priest and Ken Hightower address the root cause of our current economic ills. While expectations for equity returns are being lowered, we believe stocks can still provide attractive returns over the long term.

William W. Priest, Kenneth N. Hightower
August 07 2011 The Case for Non-U.S. Small-Cap Equities

Today, there are many reasons from both a beta and an alpha perspective to maintain or increase a strategic policy allocation toward the non-U.S. small cap asset class.

Kenneth N. Hightower, Emily Baker, Eric Citerne
April 18 2011 Free-Cash-Flow Investing: A Value Strategy

Value, a word commonly used in our profession, means many things to many people. We share our perspective of value, as reflected in our free-cash-flow methodology, and how it relates to the conventional concept of value.

Ken Hightower, David Pearl, William W. Priest, Mike Welhoelter
April 11 2011 The “Freezer Moment”: When Reality Strikes

Despite the many growing challenges that face global economies, equities of well-managed, free-cash-flow growing, dividend-paying companies should do well.

William W. Priest
March 21 2011 Japan: Our Outlook
Perspective from a portfolio standpoint regarding what the events of Japan could mean in a broader global context.
William W. Priest, David Pearl
January 10 2011 Macro Markets and Micro Opportunities
In a market likely to remain fixated on macro events, there are still plenty of micro opportunities.
William W. Priest
November 08 2010 The 9% Solution

In a world likely to offer 6-8% long term equity returns on average, we discuss a strategy that should weather the challenges that lie ahead and provide a "9% Solution" with lower volatility over the long term.

William W. Priest, Eric Sappenfield, Mike Welhoelter
September 03 2010 The Role of “Mr. Market” in Asset Pricing

With a long term perspective, certain equities may be viewed as a "safe" asset now.

William W. Priest
July 16 2010 The Good, the Bad, and the Ugly

Epoch seeks equities positioned to survive and perform well no matter which "gang" wins the day.

Ken Hightower
June 25 2010 The Coming Change in Expectations

Changes in the investment landscape are creating new opportunities in the equity markets, especially relative to fixed income.

William W. Priest
April 28 2010 The Power of Zero, The Dash for Trash and The Economic Growth Path

The power of zero interest rates have had an impact on the stock market. However we believe it has run its course with respect to its influence on valuations.

William W. Priest
February 20 2010 The Small Cap Conundrum of 2009

2009 underperformance in U.S. small cap stocks - a comparison of the Russell and MSCI small cap indices.

Ken Hightower
February 02 2010 Half Time at the Financial Super Bowl
The battle between the "Power of Zero Interest Rates" and "Deleveraging and its Consequences".
William W. Priest
January 20 2010 Dividend Days
Dividends - in the form of cash, share buybacks and debt repayments - will be a primary determinant of total equity returns in the years ahead.
William W. Priest
September 28 2009 The Financial Crisis: A “Whodunit” Perspective

The causes, implications and lessons of the 2008 financial crisis.

William W. Priest
July 23 2009 The Easy Way Out…
Have we taken the easy way out of the most difficult economic problem in over 70 years and how should investors adjust their approach?
William W. Priest
May 20 2009 A Case for a Market Bottom
The liquidity crisis subsides and leads us to take a cautiously optimistic outlook on the recovery of the economy.
William W. Priest
April 03 2009 Equities: Priced for a Calamity, But Not for a Near-Term Recovery
An explanation for the financial crisis and the case for why certain equities now offer compelling long-term value.
William W. Priest
March 11 2009 Dividends - A Perspective
Dividends really matter; and capturing them in a low cost, diversified manner is both important and rewarding for investors.
William W. Priest
February 11 2009 A Really Bad Idea
The benefits of global trade and why a solely "Buy American" policy is a bad idea.
William W. Priest
January 16 2009 A Change in Fortune and the Reasons Why

A review of government intervention during the 2008 financial crisis and the outlook for recovery.

William W. Priest
October 23 2008 Equities – A Bottom or a Value?
There are reasons to maintain a conservative outlook, but values exist.
William W. Priest
September 30 2008 An Investment Outlook
The recession train has officially left the station. We look at what's next for the global economy.
William W. Priest
September 29 2008 The Earthquake, the Tsunami, and the Backwash: A Market Commentary
Erratic weather patterns and an uncertain global economy; the comparisons are enlightening.
William W. Priest
September 15 2008 Market Commentary
Insight on the global economy's failing health, the nature of the illness and potential cures.
William W. Priest
July 21 2008 The Perfect U.S. Economic Storm

The U.S. economy faces extraordinary challenges.

John Reddan
April 21 2008 Address to Southern Conference on Teacher Retirement
Words of guidance for the informed investor to help steer clear of the rough seas on the horizon.
William W. Priest
February 29 2008 Dual Economies: The Developing Storm

There are two sides to the story of the oncoming recession: the real economy and the financial economy.

William W. Priest
January 08 2008 Bleak House, Bleak Times?

Bleak times: a look ahead into the recession of 2008.

William W. Priest
December 03 2007 Incredible Shrinking Equity
The current and future destruction of equity capital within the banking system and its impact on the real economy.
David Siino
November 14 2007 China: a Long March to Imperial Renaissance
The world rediscovers China.
Thomas Hu
November 09 2007 Hedge Fund Math: Why Fees Matter

A look at the fees charged by hedge funds and their effect on the investor.

William W. Priest, Mike Welhoelter
September 04 2007 A Roller Coaster Called Credit

Examining the forces that fueled the market's climb, our expectation for an impending fall, and the wild ride in store for debtors, lenders and, most importantly, investors.

William W. Priest
May 23 2007 Punctuated Equilibrium and Its Relevance to Investment Markets
Bill Priest addresses the Institute for Private Investors on the topic of "sustainability and disequilibrium".
William W. Priest
April 23 2007 The Canary in the Coal Mine: Subprime Mortgages, Mortgage-Backed Securities, and the US Housing Bust

A look at the bursting housing bubble and the impact on the future of the global economy and financial markets.

William W. Priest, John Reddan
March 21 2007 Equity Returns: Sources and Drivers for the First Decade of the 21st Century

An examination of Epoch's investment philosophy which is based around the changing order of the sources of equity return.

William W. Priest
January 05 2007 2007 Investment Outlook: Not So Calm Beneath the Surface “Goldilocks is Dead”

A look at 2007 and what lies ahead.

William W. Priest, John Reddan
November 21 2006 Financial Services Stocks: The Storm Clouds Gather

More signs that point to the weakness and vulnerability of financial services stocks.

John Reddan
September 06 2006 Wishes and Beliefs—How They Influence Economic and Financial Forecasts

How our insights and experience tell us that simply wishing for a robust economy will not result in one.

William W. Priest
August 03 2006 Punctuated Equilibrium and the Risk Reduction Trade

A discussion of the concept of "punctuated equilibrium" and the manner in which this theory of evolutionary biology can be applied to today's financial landscape.

William W. Priest
July 31 2006 What the Market Has Not Discounted

How informed investors can build a winning portfolio in the current market environment.

William W. Priest
July 12 2006 A Slowdown in the Making?

Inflation concerns and peaking interest rates portend a slowdown in housing and economic growth.

William W. Priest
June 15 2006 The Risk Reduction Trade

Financial and economic forces behind the recent equity market decline.

William W. Priest
May 31 2006 Dividends - Here They Come

Why dividends are an important source of equity returns.

William W. Priest
January 09 2006 The Ongoing Importance of Free Cash Flow and Globalization

What drives today's equity returns and how can we capitalize on these trends?

William W. Priest
January 05 2006 2006 - More of the Same (But with a lot less confidence)

Trends and issues for the new year's investment landscape.

William W. Priest
December 28 2005 The Case for Shareholder Yield

The growing significance of free cash flow and shareholder yield as a dominant driver of future equity returns.

William W. Priest
October 24 2005 Equity Research at Epoch Investment Partners

A clear and simple approach, designed to identify stocks that will protect our client's capital and provide a return on their investments.

William W. Priest, David Pearl
September 08 2005 It’s a MAD, MAD, World (and It’s Working, So Far!)

The benefits of globalization.

William W. Priest
August 15 2005 Financial Services Stocks: The Wheels are Coming Off

More signs point to inherent weakness and vulnerability of financial services stocks.

John Reddan
August 08 2005 Mixing Financial Principles with Accounting Standards – A Slippery Slope
The battle between accounting and finance; a comparison of stock market valuation methodologies.
William W. Priest
July 04 2005 The Silver Lining and a Big Dark Cloud
The ominous cloud of a housing bubble could change the economic landscape and lead investors to focus on companies that will do well in future.
William W. Priest
July 04 2005 The Future of Housing Prices - The Dark Side of Falling Interest Rates

A closer look at the housing market, where the continuation of low interest rates has created a bubble and is poised to play a vital, and potentially problematic, role.

William W. Priest
June 06 2005 An Alternative Strategy for Seekers of Absolute Return

Our "long only" investment philosophy and winning the "free ante".

William W. Priest
April 07 2005 Back to the Future

How the history of equity returns can be used to optimize stock selection, portfolio construction and total value creation.

William W. Priest
December 30 2004 Silver Linings
Despite dark clouds in the distance there are plenty of investment themes to capture.
William W. Priest
July 26 2004 3-11 - A Rate, Not a Date
The yield on U.S. Treasury bonds touched its lowest point in decades in 2003. What does this mean for future markets and returns?
William W. Priest
May 25 2004 Value vs. Growth - An Update
An examination of value vs. growth from 1993-2004.
William W. Priest
April 01 2003 Why the World Works in the Long Run
Globalization, the Law of Comparative Advantage and the importance of free cash flow.
William W. Priest
October 25 2002 Financial Market Perspectives and Drivers
The linkages between the financial economy and the real economy.
William W. Priest
June 17 2002 The Case for Research-Based Small-Cap

Why research matters most in small-cap companies.

William W. Priest
November 03 1978 An Analysis of Transaction Costs in Equity Trading

Analyzing the cost of equity trading.

William W. Priest
June 01 1978 Pension Claims and Corporate Assets

An overview of pension claims and corporate assets

William W. Priest
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