The Stingy News Weekly (01/05/03)
The Markets This Week
DOW 30: 8,602 +3.59% with a median P/E of 24.1
S&P/TSX: 6,773 +2.68% with a median P/E of 22.7
The Value View
Dow at a P/E of 20: 7,139 (-17.0%) Poor Value
Dow at a P/E of 15: 5,354 (-37.8%) Fair Value
Dow at a P/E of 10: 3,569 (-58.5%) Good Value
S&P/TSX at a P/E of 20: 5,967 (-11.9%) Poor Value
S&P/TSX at a P/E of 15: 4,476 (-33.9%) Fair Value
S&P/TSX at a P/E of 10: 2,984 (-56.0%) Good Value
It's time to clear out the deadwood
"The key to a better market in 2003 will be how fast business can rid itself of too much stuff: unneeded plants, expensive pension plans, even whole companies."
Grandpa? He's busy at the office
"These days older, experienced workers are more often avoiding the ax. Plus, many have no choice but to keep working for financial reasons."
Jim Kilts is an old-school curmudgeon
"When he took over Gillette in February 2001, Kilts inherited one of the biggest headaches in consumer products. The once highflying company, the maker of Mach3 razors, Duracell batteries, and Oral-B toothbrushes, had missed its earnings for 14 consecutive quarters. Neither sales nor earnings had grown in five years. Two-thirds of Gillette's products were losing share. Once a hot stock, the Boston company had become a pariah, seeing a 30% drop in its value between 1997 and 2000."
The bankruptcy run isn't slowing
"Don't expect 2003 to be any better. With the economy still waiting for a lift, analysts at credit-rating outfits predict that roughly 1 in every 13 companies with noninvestment-grade debt, or 8%, will default and declare bankruptcy in the next 12 months. While that's about the same ratio as in 2002, it's double the average over the past 20 years."
Econ 101: supply, demand and prayer
"The U.S. economy is in trouble, as evidenced by the new Merrill Lynch slogan: 'Please Buy Stocks Or Our Children Will Starve.'"
Getting to the bottom of 2002
"We were also wary of the stock market. One day it was up; the next day it was down; the next day it was way down. And as we watched our 401K plans decline from a retirement villa in France to a refrigerator carton in an alley, we heard the unceasing babble of the financial ''experts,'' the ones who have never yet failed to be wrong, speculating endlessly on whether the market had bottomed out"
When creative leases are a red flag
"A number of large-scale bankruptcies, not to mention the Enron debacle, have made investors realize the importance of scrutinizing a company's financing activities. So here's something to watch for in 2003: references to "sale-leaseback transactions." These are deals where companies raise cash by selling corporate real estate, then sign a long-term lease to continue using it. Expect to find a lot more of them."
Show us the dividends
"Investors are demanding proof of corporate profits. And what more tangible evidence is there than dividends?"
This week's trivia questions are: Q1. How many stocks in the NASDAQ100 earn a profit? Q2. How many stocks in the S&P/TSX Composite have a P/E ratio of less than 10? Q3. How many stocks in the S&P500 have a P/E ratio of less than 10? The answers to last week's trivia questions are: Q1. How many stocks in the S&P/TSX Composite pay a dividend? A1. 123 out of 232 stocks (53%). Q2. How many S&P/TSX Composite stocks have a yield of more than 5%? A2. 4 out of 232 stocks (1.7%). Q3. How many S&P 500 stocks have a yield of more than 5%? A3. 30 out of 500 stocks (6.0%). Source: globeinvestor.com The Stingy StoreDownload a sample of the Rothery Report Download a sample of Frugal Funds Subscribe Today Bullishly Yours, Norman Rothery ISSN 1499-2795 To (un)subscribe please use our email centre at http://www.stingyinvestor.com/cgi-bin/email.cgi Refer to legal & conflict of interest disclaimers at http://www.stingyinvestor.com/SI/legal.shtml http://www.stingyinvestor.com/SI/legal/conflict.shtml
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