How Revenue Weighting Performed During the Tech Bubble
How would a revenue-weighted portfolio have performed in the aftermath of the tech bubble of the late 1990s?
In this video, Senior Investment Strategist Brian Levitt does a deeper dive into the price-to-sales concept to explain how a revenue-weighted strategy may have been able to significantly outperform a market-cap-weighted approach during this turbulent period.
Using market data from the late 1990s, Levitt illustrates how revenue-weighted strategies were able to pull investors away from the momentum factor―the root cause of high price-to-sales ratios―and point them towards the factors that have historically helped to drive returns.
Levitt summarizes that if portfolios are rebalanced on sales (the denominator in a price-to-sales ratio) instead of price (the numerator in a price-to-sales ratio), better value-oriented portfolios may be created. This, he believes, is more likely to provide better future returns for investors.
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