Theoretical and Applied Economics
No. 3 / 2026 (648), Autumn
Comparing portfolios built from intrinsic-value-based stock picks versus market-cap-weighted indices
London School of Economics, United Kingdom
Dumitru Alexandru BODISLAV
Bucharest University of Economic Studies, Romania
Abstract. This study examines whether a portfolio selected on intrinsic value differs structurally from a capitalization-weighted portfolio drawn from the same universe. A random sample of 29 S&P 500 firms was valued with a free-cash-flow-to-the-firm discounted cash flow model; the 15 most undervalued names formed an equally weighted intrinsic-value portfolio, compared against a capitalization-weighted benchmark built from the same sample. The intrinsic-value portfolio showed lower valuation multiples, a higher dividend yield, a sector mix tilted toward cyclical and staple industries, and markedly lower representation among the largest firms. A three-month return comparison is reported for illustration only.
Keywords: intrinsic value, discounted cash flow, market efficiency, capitalization weighting, portfolio construction.
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Contents
- Comparing portfolios built from intrinsic-value-based stock picks versus market-cap-weighted indices
Jack James VADUVA
Dumitru Alexandru BODISLAV
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