The Stingy News Weekly (01/12/03)
The Markets This Week
DOW 30: 8,785 +2.13% with a median P/E of 25.3
S&P/TSX: 6,802 +0.43% with a median P/E of 22.5
The Value View
Dow at a P/E of 20: 6,945 (-21.0%) Poor Value
Dow at a P/E of 15: 5,208 (-40.7%) Fair Value
Dow at a P/E of 10: 3,472 (-60.5%) Good Value
S&P/TSX at a P/E of 20: 6,046 (-11.1%) Poor Value
S&P/TSX at a P/E of 15: 4,535 (-33.3%) Fair Value
S&P/TSX at a P/E of 10: 3,023 (-55.6%) Good Value
Invest like Warren Buffett
"If you're looking for a guide to help you navigate this brutal bear market, can we suggest a candidate? He's folksy and a bit old fashioned, the type of person who likes nothing better than relaxing over a Cherry Coke and a Dairy Queen hamburger. He's also hopeless when it comes to technology and he insists on living in the middle of nowhere (Omaha, Neb. to be precise). Still, we think he's got potential. For one thing, he's already made a few billion dollars in the stock market. Better yet, he's survived and even thrived during previous market downturns."
No way out
"Competition to make products for Western companies has revived an old form of abuse: debt bondage."
Out of options?
"As if tech companies don't have enough problems to contend with as they head into 2003, they're about to face another: It's going to be tougher than ever to dole out stock options to their employees this year. The culprit? Big institutional shareholders, which are sick of seeing employees cash in as stock prices dwindle."
The ABC perspective
Buying Toonies for Loonies from Irwin Michael
The best & worst managers of the year
"Chief executives seemed startled by the ridicule, distrust, and outright contempt they faced. At the same time, they had to contend with an economy that edged ever-so-slowly toward a recovery but kept falling short. If ever there was a year to examine the many ways in which managers succeed--and fail--this was it."
"Given the strong public demand for predictions, it would be too much to ask financial journalists and brokerage analysts to stop issuing annual forecasts. But they could conceivably fulfill the demand by emphasizing particular stocks, where academic research has uncovered several predictive factors, such as average volume turnover, earnings momentum, valuation ratios, sales growth rates, as well as the level of accruals and capital spending in relation to assets. Otherwise, leave the annual predictions about the general market to the psychics."
Always a bigger fish
"Investors are forgiven if they feel a strange sense of deja vu these days. With all the hostile takeover activity of late, it seems like the boom-boom days of the mid-'80s when masters of the universe like Michael Milken and T. Boone Pickens ruled Wall Street."
Only at the right price
"What investors have to decide, today and into 2003, is this: After the turbulence of the past 20 years, are stock prices now low? Or are they still high?"
Is MPT the solution -- or the problem?
"Modern Portfolio Theory bestrides the investment world today like the legendary Colossus. Its precepts dominate the education and training of every professional investment manager; its key terms -- risk-return tradeoff, diversification, expected stock returns -- frame virtually all advice offered to non-professional investors. Indeed, so complete is MPT's domination that we may forget how recent it is. While the set of concepts itself is a product of many years' labor by many individuals -- the seminal paper by Harry Markowitz was published exactly 50 years ago -- widespread adoption of MPT principles by the professional investment community is barely 20 years old. Our thesis is that exclusive and uncritical devotion to investment ideas that can hardly be said to have stood the test of time is dangerous in itself -- but especially so today."
The $10 billion pill
"Hold the fries, please. Lipitor, the cholesterol-lowering drug, has become the bestselling pharmaceutical in history. Here's how Pfizer did it."
This week's trivia questions are: Q1. How many stocks in the S&P500 have a P/Book ratio of less than one? Q2. How many stocks in the S&P500 have a P/Sales ratio of less than one? Q3. How many stocks in the S&P/TSX composite have a P/Book ratio of less than one? The answers to last week's trivia questions are: Q1. How many stocks in the NASDAQ100 earn a profit? A1. 73 out of 100. Q2. How many stocks in the S&P/TSX Composite have a P/E ratio of less than 10? A2. 14 out of 232. Q3. How many stocks in the S&P500 have a P/E ratio of less than 10? A3. 30 out of 500. 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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