WHY
ANOTHER
EQUITY
STRATEGY?
Having an idea of the floor
matters more than chasing
the ceiling
The Equity Holdings strategy is the equity sleeve of the Basic Strategy framework. → See the full strategy
VALUATION CONTEXT
Where US equities trade today
Two indicators frame the starting point for any long-term US equity allocation: the Shiller Cyclically Adjusted Price-to-Earnings ratio (CAPE) and the Excess CAPE Yield (ECY). Together they describe both the absolute price of US equities and the equity risk premium relative to real bond yields.
Shiller CAPE Ratio — S&P 500
Excess CAPE Yield — equity earnings yield minus real 10-year Treasury yield
Methodology and data sources
Historical values shown for 1881–Sept 2023 use Prof. Shiller's published TR-CAPE-based ECY series. Values from Oct 2023 onwards are recomputed by B.U.Y. INVEST GmbH using plain CAPE from multpl.com plus 10-year Treasury and CPI data — a methodologically slightly different basis (plain CAPE vs TR CAPE). The empirical difference at the boundary is approximately 12 basis points, not visible at chart resolution. Recent CPI carry-forward (typically 1–2 months) is used when multpl's CPI publication lags. Both effects are documented in the data pipeline at scripts/update-shiller-cape.mjs.
Source: Shiller historical 1881–Sept 2023 + multpl.com live data Oct 2023+
What does this mean for an equity allocation?
Both indicators currently sit at levels that have historically coincided with low subsequent long-term real returns for the S&P 500. The Shiller CAPE has reached levels exceeded only briefly in the late 1920s and during the 2000 dot-com peak. The Excess CAPE Yield has compressed toward the 25th percentile of its post-1950 distribution.
Bunn & Shiller (2014) and Jivraj & Shiller (2017) document an empirical inverse relationship between the Excess CAPE Yield and subsequent 10-year real equity returns. The relationship is not deterministic, and historical patterns may not persist — but the indicator does describe an unusually compressed equity risk premium relative to the post-war record.
This raises a structural question for any long-term equity allocation. Passive market-cap-weighted exposure to the S&P 500 takes the index as given, including its current valuation. A rules-based, valuation-aware approach asks a different question: how should an equity portfolio be constructed when starting valuations matter for forward expected returns?
This is the question B.U.Y.'s equity strategy is designed around. The strategy's construction, eligibility rules, and rebalancing discipline are described in the sections below.
OUR STRATEGY
Constructed on fundamentals, with a margin of safety
PROFITABILITY
Selecting companies with demonstrated ability to generate sustainable profits and strong return metrics over time.
ASSET UTILIZATION
Focusing on businesses that efficiently deploy capital and generate superior returns on invested capital (ROIC).
PRICE
Applying valuation discipline to ensure entry points offer adequate margin of safety relative to intrinsic value.
↓ lower is more conservative valuation
↑ higher is more conservative valuation
EBIT (operating earnings before interest and tax) is structurally larger than net earnings for most profitable companies, and the Enterprise Value adds debt that the equity-only market capitalisation does not. As a result, an EV/EBIT multiple typically applies a stricter valuation discipline than a P/E ratio: it requires the company to be cheap relative to its operating profit pool and to its full capital structure, before any benefits of leverage or tax planning. EBIT Yield is the inverse of EV/EBIT and is shown for reference; it is not directly comparable to the S&P 500 earnings yield in the Valuation Context section above, which uses smoothed 10-year earnings (Shiller methodology) over equity market capitalisation.
DIVERSIFICATION
Building portfolios across geographies and sectors to reduce concentration risk while maintaining quality standards.
Portfolio metrics as of —. Benchmark composition derived from Aswath Damodaran's enterprise-value-multiples dataset (Stern NYU). Past performance and aggregate metrics are not indicative of future results.
Where the broad US equity market — which represents the largest share of global equity capital and serves as a reasonable proxy for the average global investor’s exposure — trades at a CAPE that compresses the forward equity risk premium, the B.U.Y. Equity Portfolio is constructed to a stricter valuation discipline: an EV/EBIT-based test that captures both operating profitability and full capital structure.
B.U.Y. EQUITY HOLDINGS GEOGRAPHIC ALLOCATION
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Get in touchThis page is for informational purposes only and is directed at professional and institutional investors within the meaning of Art. 4 FinSA. It is not investment advice, an offer or solicitation, or a forecast of future returns, and is not directed at retail clients or US persons. Past performance and prior valuation levels are not indicative of future results.