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A popular Wendy's commercial in the 80s made famous the question: "Where's the beef?" Good one. And here's an even better one: "Where's the alpha?" You might want to whip this one out the next time you meet with your portfolio manager.
Alpha is the over-and-above-the-expected return. It is the "value added." Therefore, it makes sense that a positive alpha means an investment has outperformed its market-predicted return, while a negative alpha would mean just the opposite. The expected return is calculated by a formula that takes into account the investment's level of unavoidable risk (aka beta).
Ever stepped into an elevator and after the doors close you become aware of an almost-suffocating scent coming from the woman next to you who must have bathed in perfume? Well, as you know, once the doors close you can't escape the smell until the ride is over. This is similar to beta, which is risk that can't be reduced or diversified away. A measure of "systematic" or market related risk, beta is used as a measure relative to a certain index -- such as the S&P 500.
So, for example, let¿s say your portfolio is managed to compete against the S&P 500. If you generate a better return than the index while not taking on added risk (standard deviation of returns) then you get alpha. Low beta means the market-related risk is low and vice versa for high beta.
Another example, let's say a mutual fund or stock has a beta of 1.5 relative to the S&
P500 ¿ that means it is 1.5 times as risky. So, over time, if the S&P 500 goes up 1%, your portfolio should be up 1.5%
plus (one can hope) some percentage of alpha. If the S&P 500 is down 1%, your portfolio should be down 1.5%.
Alpha
and beta are based off of linear regression of a set of data. Warning: this may cause a high school fifth-period flashback,
but it will be over before you know it:
The equation for a line is Y = a + bX.
a = alpha (the Y intercept - the added
value)
b = Beta (the coefficient you multiply X by)
X = S&P 500 (in this case)
Y = your portfolio
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Tuesday, May 20, 2008
Lumber Liquidators to Sponsor Travis Kvapil at Coca-Cola 600
Comtex
TOANO, Va., May 20, 2008 (BUSINESS WIRE) ----Lumber Liquidators (NYSE: LL), the largest specialty retailer of hardwood flooring in the United States, announced today that it will sponsor Travis Kvapil, driver of the No. 28 Yates Racing Ford at the 2008 Coca-Cola 600. The May 25th race at Lowe's Motor Speedway will mark the first primary sponsorship for Lumber Liquidators in NASCAR's Sprint Cup Series in 2008.
"NASCAR fans are great supporters and customers of Lumber Liquidators, and we are always interested in opportunities with the Sprint Cup Series that support our successful history in the Craftsman Truck Series," said Tom Sullivan, founder and CEO of Lumber Liquidators. "Travis Kvapil is a great driver and Yates Racing is a formidable team with a championship in its past -- we look forward to running up front at the Coca-Cola 600."
Kvapil finished eighth in the May 10th race at Darlington Raceway, his third top-10 finish of the season. He currently sits 18th in the NASCAR driver point standings.
"There's a lot of momentum right now at Yates Racing, thanks to all the wonderful sponsors we've enjoyed partnerships with already this year. We're very grateful that companies recognize our increased performance both on and off the track," said Travis Kvapil, driver of the No. 28 Lumber Liquidators Ford. "Lumber Liquidators is a fantastic company and I am proud that they chose to partner with our No. 28 team for the Coca-Cola 600; one of the most exciting races on the Sprint Cup schedule."
About Yates Racing
Yates Racing operates two motorsports teams in the NASCAR Sprint Cup Series. Formerly known as Robert Yates Racing, the team is owned by Doug Yates, who took the reins after his father, Robert Yates, retired at the end of the 2007 season, and partnered with Max Jones; a former road racer and long-time championship General Manager. The 2008 season will mark the 20th year of competition for the Ford team. During those years, the organization had a total of 57 wins, 48 poles, 269 top-five finishes, 427 top-ten finishes, and a NASCAR Sprint Cup Series Championship. Yates Racing will field two Ford Fusions in the 2008 NASCAR Sprint Cup Series, with drivers Travis Kvapil and David Gilliland. Sponsorship opportunities are available; please contact Kevin Thomas with Yates Racing at 704-706-2120.
About Lumber Liquidators, Inc.
Lumber Liquidators is the largest specialty retailer of hardwood flooring in the United States. With more than 130 stores and 150 varieties of flooring, including solid and engineered hardwood, bamboo, cork and laminate, and featuring premier brands such as Bellawood (which features a 50-year warranty), Dream Home, Schon, Virginia Mill Works, and Morning Star, Lumber Liquidators has one of the most extensive selections of prefinished and unfinished hardwood flooring in the industry. Its hardwood line is made up of more than 25 domestic and exotic wood species in both prefinished and unfinished brands of various lengths and widths.
While keeping costs down is part of the Company's philosophy, Lumber Liquidators is also committed to offering high-quality, name-brand products that it stands behind with confidence.
SOURCE: Lumber Liquidators
Yates Racing Jessica Rohlik, 704-720-4612 jrohlik@teamyatesracing.com or Verve Sponsorship Group Brian Evans, 404-593-8320 bevans@vervesg.com
Copyright Business Wire 2008
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