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Dear Ira,
No problem with the perception concept short term. The point I was
raising is that the lowest estimated P/E I could find for the S&P
stocks from the EXPERTS was 30sh for 2002. That usually is a P/E
relegated to rapid growth rate companies.
Now the perception may exist that these stocks are higher value than
others not in the Index that have higher P/E's.
For my money I would keep a stable portfolio of a family of Funds and
make sure there is the least overlap in their portfolios. The
American has four of the largest funds in America in their family and
some are up to 70 years old...with respectable 5, 10, and 20 year
Performance.
Then one can hedge bets for short term with what suits their trading
personality.
The circuitous route that occurred in me providing the website led me
and I hope others to a long term point of view not distorted by short
term TA.The archives at that site are full of pertinent articles
regarding this subject and kept well up to date. I believe Bronson
gave a potentially accurate viewpoint of the long term.And who is to
say that a stock can not have a low P/E out in 2006 to 2008 and be
the bargain of the century because its earnings grew to a point where
it should command a higher P/E.
A case in point ic GLW [Corning] while they have a superior single
filament fibre for transmission that will do what 100 or more will
do, no one cares because what is in use is not overcapacity yet. So
many great companies are trading on what can happen if demand peaks
again for their new products. That is value at current prices to me.
GE is also relative value to me in the market. If it goes down , so
what. Sell covered calls at a price worth it to you.
John
------------------ Reply Separator --------------------
Originally From: Ira Tunik <irat@xxxxxxxxx>
Subject: Re: [RT] Techno-Fundamental Analysis
Date: 05/26/2002 11:11am
The markets don't run on reality, but on perception. A 30 PE ration
is not
high if a company is growing at 30% per year or better. It is
excessive when
a company is growing at 5% per year. It is easier for $200,000,000
company
to grow at 50% per year then a $3 billion company. So let us keep
everything
in perspective. The question is can the companies trading today at
high
multiples grow at those rates, if not then they are over valued
technically.
Does that mean the price will fall? No, the perception might be that
it is a
take over candidate or there is a new product on the horizon or a more
fertile area of growth is just over the horizon. So it is
perception, not
fact that drives stock prices. I remember not to far back when the
banks had
all those bad loans to foreign countries. If they put together their
balance
sheet and went to get a car loan, they wouldn't qualify. Yet the
stocks kept
rising for another year, then the crash came. Not on the facts of the
matter, but on the perception of things to come.
The funds and analysts play tricks with their analysis. Some use
growth
rate, others us cash flow, and still other use return on equity.
There are
those that use up to 20 fundamental criteria to judge a company. In
my
opinion, it doesn't make any difference what the company does, what
its
future is, or what its fundamentals are, the only thing that really
counts is
can I make money trading this stock either long or short. Being
fundamentally right is not the answer. As in Blackjack, the object
is not to
get closest to 21, the object is to beat the dealer. That is the
only way
you can make any money. In the stock market the object is not to be
fundamentally right about the company, but to make money on its price
action. Ira.
John Cappello wrote:
> Perhaps the most basic tool of Fundamental analysis is PE ratio.
> Numerous attempts at correlating this have been made and often the
> Technical Analysis defies fundamental logic.Dividend yield currently
> at 1.5% also is historically low. But they both can work in tandem
> with long term Technical Analysis.
>
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