The market cap of 9 of the 10 largest companies in America on 7/5/2024 was $18.26 trillion. The Fiduciary Risk Rating clearly indicated that most of these 9 companies were extremely risky.
Most of the investment industry still defines risk by volatility or beta—how much a stock’s price moves. But at Equity Risk Sciences (ERS), we believe that’s far too narrow. Risk is about the probability and magnitude of potential loss based on a company’s financial fundamentals, not its trading pattern.
Let’s walk through a fun little puzzle about investing in stocks—don’t worry, it’s not rocket science, and by the end, you’ll see how straightforward it can be. Imagine you’re buying a company for $300 billion, and right now, it’s bringing in $3 billion in revenue each year. Your goal? To double your money in five years, so the company’s market value hits $600 billion.
Investors often buy stocks based on emotions rather than facts. Apple (AAPL) offered two very different buying opportunities—one in December 1999 and another in December 2000. The key difference? Valuation.
Most people think investing is about picking stocks and hoping they go up. But real investing is more like running an insurance company. The most successful investors—those who have built billions in wealth—know that some of their investments will lose money. But they don’t let those losses shake their confidence because they understand the big picture.
Viking Therapeutics (VKTX) is a textbook example of how ERS risk ratings can help investors avoid catastrophic losses. Despite sharp declines in its stock price over the past year, VKTX remained a high-risk stock at every stage of its fall.
While many investors in 2021 were still optimistic about PATH’s long-term potential, ERS’s system flagged profound risk. And the data proved correct—by March 2022, PATH had plummeted to $30.
Comparing the Net Present Value (NPV) of a public company with its market capitalization is one of the most rigorous and reliable methods for assessing whether a stock is overvalued or undervalued.
At Equity Risk Sciences, we don’t deal in speculation—we quantify risk. Palantir (PLTR) may be growing, but is it a safe investment? The data tells a different story.
At its peak, investors valued Palantir at $192 billion. Today, it’s $178 billion—but is it truly worth that much?