A $28 billion strategist flags the multi-trillion-dollar roadblock keeping investors from the stock market’s most hidden gems — and explains his strategies to outsmart it

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Many investors are missing out prized stocks because of this flaw, according to Alger's Brad Neuman.

is over, the plant will return to producing 100,000 cars again, increasing its profits and stock price as a result.

What has changed over the years is that investments in intangible assets have superseded investments in tangibles, Neuman said. A higher share of spending is assigned to intellectual property, marketing, training, human resources, and other items that don't appear on balance sheets as assets like machines do. Such intangibles are written off as expenses instead.

He cited video gaming as one such sector. If spending on ads for new games were to be capitalized on gaming companies balance sheets, their price-to-book-value ratios would fall from 4x to 3x, Neuman said. That example constitutes the first of two approaches Neuman recommended to update the definition of"value" as it exists in various indexes and ETFs. It's labor intensive, and involves understanding the value of assets, as well as products in the research and development pipeline, that are not expressed on a company's financial statements. An example is the value of Google's search algorithm, Neuman said.

 

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