The Stingy News Weekly (02/22/02)
The Markets This Week
DOW 30: 9,968.2 +0.66% to a P/E of 30.1
TSE 300: 7,426.6 -1.18% with a negative P/E
The Value View
Dow at a P/E of 20: 6,580 (-33.6%) Poor Value
Dow at a P/E of 15: 4,935 (-50.2%) Fair Value
Dow at a P/E of 10: 3,290 (-66.8%) Good Value
A Stingy Contest
Test your investment knowledge for a chance to win a copy of "The New Investment Frontier" by Howard Atkinson and Donna Green.
The betrayed investor
"Today, the Investor Class is angry and disillusioned because it feels betrayed. On the heels of Enron Corp.'s Dec. 2 bankruptcy filing--America's biggest ever--they are questioning the very integrity of the financial system. And they won't be ignored. They are a powerful group."
Time can conjure up the profits
"The evidence from both the US and the UK is that shares with value characteristics (such as a relatively high dividend yield and a low price-to-book ratio) have consistently produced higher returns than those with growth characteristics. Returns from the highest-yielding stocks among the top 100 UK companies, for example, have generated returns of 11.5 per cent per annum, against 8.6 per cent for the lowest yielding stocks, a fact that thanks to the power of compounding can produce big differences in cash returns over long periods."
A rare breed
"Independent analysts aren't perfect, but at least they're free to speak their minds. Too bad most retail stock investors are limited to brokerage reports."
"Following the go-go era of the late 1960s, after the shares of a group of popular but speculative technology stocks collapsed, investors fled from companies with confusing balance sheets. They shifted their funds to dependable companies such as Xerox, Avon Products, and McDonald's, whose business models were so simple to understand at the time that investors referred to them as "one decision" stocks. The end result: the creation of yet another bubble, this one in the stocks of what would later be dubbed the Nifty Fifty."
Senior learns tough lesson on perils of leveraged investing
"It's late 1999. Imagine you're a bank loans officer and a 72-year-old retiree proposes that you lend him $90,000 to buy a Nasdaq index fund. He's not in the best of health, but offers to put up $10,000, for a 9-to-1 leveraged investment loan. His only income is $2,000 a month from his RRIF and he still has a $66,000 mortgage on a modest home in the country."
Cisco bigs profit from shady deals
"Enron-type questions concerning the financial records of Cisco Systems, Inc. have suddenly got louder. Latest shocker: evidence that more than 12 top officials of the one-time Internet darling may have held undisclosed stakes in a Silicon Valley partnership that benefited greatly from its ties to Cisco during the 1990s."
Microsoft and the great game
"The world's biggest software firm is pushing into the mobile telephone and computer-games businesses with a series of announcements this week. These are no interesting diversions, but a desperate attempt to stop new consumer products from stealing large parts of Microsoft's market over the coming years"
New concepts for securities regulation
"Foreign firms could then deal with Canadian clients who open accounts on an unsolicited basis without complying with duplicative Canadian requirements. Canadian investors that wish to invest in foreign securities could benefit from the expertise in those securities provided by foreign registrants." [PDF] - There is some hope for Canadians who want to open a low fee US brokerage account.
Stocks: are you expecting too much?
"Investors often accuse Wall Street analysts of inflating earnings estimates to hype stocks. But guess what? Investors are guilty of outrageous expectations, too. Just look at Vitesse Semiconductor (VTSS ), the telecom-chip maker: Analysts estimate a 33.1% annual growth rate for the company's earnings for the next five years. But if you run the stock through a complex valuation model that incorporates earnings, stock prices, volatility, and interest rates, Vitesse's current share price of $12.47 assumes that earnings will grow at a hefty 56.1% a year over the same period."
The 5 dumbest things on Wall Street this week
"Remember last week when we said if you want your employees to despise you, the best way to do it is to take away their coffee? Well, we've obviously underestimated the ingenuity of America's executives."
Buffett takes a stake in Outback
"Investor Warren Buffett is renowned for taking big stakes in companies. He's also a man who likes to eat them - steaks, that is. So perhaps it was inevitable that he got around to putting his money where his mouth was."
The trivia questions this week are:
Q1. Who said "If a man will begin with certainties, he shall end in doubts, but if he will be content to begin with doubts, he shall end in certainties."?
Q2. Who said "I was suffering from my chronic delusion that one good share is safer than ten bad ones, and I am always forgetting that hardly anyone else shares this particular delusion."?
Q3. Who said "First, many in Wall Street - a community in which quality control is not prized - will sell investors anything they will buy."?
The answers for last week's trivia questions are:
Q1. Who said "The stock market is filled with individuals who know the price of everything, but the value of nothing."?
A1. Philip Fisher
Q2. Who said "In the short run, the market is a voting machine but in the long run it is a weighing machine."?
A2. Benjamin Graham
Q3. Who said "We attracted a lot of market timers and asset allocators. I don't need those goddamn amateurs in my fund."?
A3. Martin Whitman
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