Traditional value metrics don't apply to crypto. However, an "intangible value" factor can be constructed by analyzing fundamental on-chain data—such as developer commits on GitHub, daily active wallets, and transaction volume—to identify undervalued projects.
Analyzing a company's human capital reveals surprising correlations for stock performance. A higher number of PhDs per dollar of market cap is linked to better future returns, while a higher concentration of MBAs acts as a negative indicator.
Tech giants are shifting from asset-light models to massive capital expenditures, resembling utility companies. This is a red flag, as historical data shows that heavy investment in physical assets—unlike intangible assets—tends to predict future stock underperformance.
To overcome accounting's focus on historical costs, quantitative investors use unstructured data from sources like patent filings, trademarks, and LinkedIn profiles. This approach quantifies the actual output and quality of a company's intellectual property and human capital.
Intangibles can be systematically analyzed by categorizing them into four key pillars: intellectual property, brand equity, human capital, and network effects. This framework helps investors move beyond traditional accounting metrics to assess a company's true value.
Companies investing heavily in intangibles like R&D often see a temporary drop in earnings per share (EPS). This spending, however, builds long-term competitive advantages and moats, leading to substantial EPS growth over a multi-year horizon.
Adjusting financial statements to capitalize R&D provides a more accurate book value for tech firms. However, this input-based approach is limited, as the value of an intangible asset, like a successful drug patent, is non-linear and disconnected from its historical cost.
Massive AI capital expenditures by firms like Google and Meta are driven by a game-theoretic need to not fall behind. While rational for any single company to protect its turf, this dynamic forces all to invest, eroding collective profitability for shareholders across the sector.