The Stingy News Weekly (01/19/03)
The Markets This Week
DOW 30: 8,587 -2.25% with a median P/E of 25.1
S&P/TSX: 6,756 -0.68% with a median P/E of 22.5
The Value View
Dow at a P/E of 20: 6,842 (-20.3%) Poor Value
Dow at a P/E of 15: 5,132 (-40.2%) Fair Value
Dow at a P/E of 10: 3,421 (-60.2%) Good Value
S&P/TSX at a P/E of 20: 6,005 (-11.1%) Poor Value
S&P/TSX at a P/E of 15: 4,504 (-33.3%) Fair Value
S&P/TSX at a P/E of 10: 3,003 (-55.6%) Good Value
When you can't sell the goods, sell the shop
"But experience shows that retail mergers are tough to pull off and frequently end up destroying value-partly because local customs and tastes still vary greatly, and partly because global synergies in purchasing and the sharing of best business practice have been slow to materialise. Ahold of the Netherlands, for example, has come spectacularly unstuck after a three-year buying spree, and Carrefour is still licking its wounds after difficulties in integrating Promodes, which it bought in 1999. Strategic deals, like the bid for Safeway, are often the biggest failures of all."
This tunnel has an end
"There's no denying it: Bad stuff could happen. But just as a blithe disregard for risk characterized the late 1990s, obsession with it seems to have taken hold in the early 2000s. That's too bad, because despite the scary talk, the most plausible economic scenario for the year ahead is one that should inspire not trepidation but modest optimism."
The bear facts about pensions
"The three-year bear market has left many companies with big pension shortfalls, which may weigh heavily on share prices for years to come."
The Foresight saga, continued
"Whatever happens this year, Felicity will strike lucky again. But sooner or later her run of double-digit returns may come to an end. In a world of near-zero inflation, where stockmarkets in different countries are moving ever closer in step and where risk and uncertainty are on the rise, the returns that Felicity is accustomed to will be elusive. She would be wise to recall 1931, when the best performing asset was cash, offering 1% interest."
The physics of financial catastrophe
"Sornette's fractal model suggests that the current rally will stall shortly and that prices will subsequently retreat much lower over the next 12 months to 18 months, punctuated from time to time by strong countertrend rallies. After the S&P 500 Index ($INX) reaches the low- to mid-600s from its current perch around 925, his model predicts a multiyear period of convalescence for U.S. stocks before a new bull phase pushes prices back toward and beyond their 2000 highs."
Buy, Sell and Hold On!
"If you thought stock research was simple and transparent in the wake of Eliot Spitzer's crusade, you haven't looked closely at Wall Street's new rating systems."
Spitzer and the myth of independent analysis
"The Spitzer settlement is a travesty of justice. If it is true that certain individuals in the securities industry perpetrated fraud in order to garner investment banking fees, they should be criminally prosecuted and punished. Only a corrupt politician would ignore possible crimes in return for an industry's support in future political campaigns. The liberal New York democrat helped himself, not investors."
The X factor
"To build a business that dominates, you need to discover an edge that puts your company way ahead of its competitors. Just ask Starbucks, Outback, and other successful entrepreneurial startups."
EBITDA's foggy bottom line
"Critics say the accounting method can obscure grim financial realities -- and some see AOL Time Warner as the classic example."
Tools of the trade
"There's a wealth of research online for do-it-yourself investors, but as usual, you get what you pay for."
Hi, I'm SoloTrek -- fly me!
"Strap-on personal helicopter hits the auction block, but buyer must promise not to use it." Who said companies 'for carrying on an undertaking of great advantage, but nobody to know what it is' went out of style in the 1700s...
Fellowship of the Zing
"The SEC's new accounting board would never cut it in Middle Earth."
Are top investors' brains wired for wealth?
"You've done your market research and listened to the financial experts. But why isn't your portfolio growing? According to some neuroscientists, the brain and its affinity for patterns may reveal how people handle investments more so than other factors."
This week's trivia questions are: Q1. Which stock in the S&P 500 has the highest Price/Sales ratio? Q2. Which stock in the S&P/TSX Composite has the highest dividend yield? Q3. Which stock in the NASDAQ 100 has the highest dividend yield? The answers to last week's trivia questions are: Q1. How many stocks in the S&P500 have a P/Book ratio of less than one? A1. 48 or 9.6% Q2. How many stocks in the S&P500 have a P/Sales ratio of less than one? A2. 195 or 39% Q3. How many stocks in the S&P/TSX composite have a P/Book ratio of less than one? A3. 26 or 11.2% Source: globeinvestor.com & msn.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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