CAEE™ Ratio

Dale discusses a novel approach to valuing individual stocks. 

Verbal Disclosures read from 2:54 - 3:50 .

General information and full disclosures for Dale’s Solo Investors Podcast LLC are listed here: dalex5.podbean.com 

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CAEE™ Ratio — Patent Pending

CAEE™ Ratio is a proprietary investment methodology developed and owned by Dale’s Solo Investors Podcast LLC.

 

 The CAEE™ Ratio and its use in index construction, ETF automation, and financial analytics is the subject of a provisional patent application filed with the USPTO by Dale’s Solo Investors Podcast LLC and is a proprietary intellectual asset. The CAEE™ Ratio is currently in the process of being trademarked.

 

 I noticed that many traditional valuation ratios often fall short when it comes to avoiding value traps (especially in companies carrying high levels of debt.) That realization led me to dig deeper. I found that while the EV/EBIT ratio does account for a company’s debt, it typically only reflects a single year's EBIT, which can vary significantly from year to year. It doesn’t adjust for long-term fluctuations, making it potentially misleading for long-term investors.

That’s when the idea clicked — Cyclically Adjusted Enterprise Value to EBIT. ( CAEE™ Ratio) 

 

The CAEE™ Ratio, compares a company’s enterprise value to its inflation-adjusted, 10-year average EBIT. Unlike traditional valuation ratios that fluctuate with short-term earnings volatility or market cycles (like the normal EV/EBIT ratio) , the CAEE Ratio normalizes operating performance over a full economic cycle—offering a more stable and meaningful measure of intrinsic value. My vision is to use this ratio, potentially along with other cyclically adjusted metrics, to power a new generation of investment strategies and financial indices—strategies that are rules-based, decile-driven, and dynamically rebalanced to capture long-term alpha through deep fundamental discipline.

 

This invention enables the construction of diversified portfolios, financial indices, and rules-based investment portfolios by selecting securities from the most favorable CAEE™ Ratio deciles, quantiles, or percentages.The invention applies across multiple indices, such as the S&P 500, S&P MidCap 400, S&P SmallCap 600, Russell 2000, etc. ( I am not affiliated with four these indices )   and supports the creation of investment vehicles including exchange-traded funds (ETFs), mutual funds, exchange-traded notes (ETNs), and custom financial indices. 

 

Alternatively, the invention can be applied to individual stock analysis ( which is what was done in this episode) . Please note: This security-level report reflects a component-level analysis used in the ongoing development and maintenance of the CAEE™-based proprietary index system, which aggregates multiple such analyses into broader ETF, index, ETN, ETP, and mutual fund strategies.