OS
Lifer
- Oct 11, 1999
- 15,581
- 1
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the stock market is still massively overvalued on nearly all indicies
http://online.barrons.com/publ...0-indexespeyields.html
http://online.wsj.com/mdc/publ...html?mod=mdc_uss_pglnk
the stock market is still massively overvalued on nearly all indicies
http://online.barrons.com/publ...0-indexespeyields.html
http://online.wsj.com/mdc/publ...html?mod=mdc_uss_pglnk
- Jan 23, 2002
- 2,206
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This is an area where one needs to analyze beyond the surface numbers. A year ago, the indices were higher with lower P/E ratios. Now we have sinking indices with much higher P/E's. Why?
There really is one main reason, and that is the financial sector. This sector distorts the valuation with their massive write-offs. If you take out financials (which bear a significant weight to the indices), the current valuations are moderately undervalued, which supports a bullish market view. Earnings for the entire S&P 500 slumped 23% from last year's period. But excluding the financials, earnings were actually up 16%. The weakness in housing and finance has not permeated through manufacturing and consumer spending. It has affected them sure, but no where near recession levels, at least not with the current data we have on hand.
The big worrisome factor that is affecting Wall Street right now is renewed inflation concerns, which is caused by a multitude of factors, including oil. Earlier this year, there was a flight to quality into bonds. Now, it looks like people are dumping stocks, but not buying as much bonds because investors are worried that inflation will erode the treasuries value.
Economic growth is also questionable at this point, but the numbers do not simply point to a recession. I track all the weekly data that come out, and it tells me that yes, growth has slowed significantly, but it has not detoriated into recession-like levels.
This isn't like the dot-com bubble folks. Neither I or Joe-Six-Pack can't predict what will happen in the next few months, but on a valuation basis, things look very reasonable.
OS
Lifer
- Oct 11, 1999
- 15,581
- 1
- 76
heh, you are sadly mistaken if you think the financials have taken all their writedowns, which actually means the P/E of the indicies can look even worse.
the woes of the financial sector are going to eventually drag down the rest of the economy.
the fate of the financials and the consumer are actually more or less tied together now, the era of cheap and easy credit is over, considering the consumer being 2/3rds or whatever of the US economy.
the woes of the financial sector are going to eventually drag down the rest of the economy.
the fate of the financials and the consumer are actually more or less tied together now, the era of cheap and easy credit is over, considering the consumer being 2/3rds or whatever of the US economy.
I'm now looking for an exit point in BHP. I believe the company is now seriously overvalued especially comparing it's historical valuations.
It's seen a nice rise since I bought it at $51.96 in early May last year. I also bought FCX during that period, but I still plan on keeping it.
LUK has been good, and is a little overpriced now, but I'll still hold it.
They're the only company that have demonstrated to me that they can both walk and chew gum at the same time IMO.
My healthcare stocks are doing excellent...GILD, JNJ, TEVA, ESRX, COV, and MR. :thumbsup:
I will still keep PWE(till the end of the year at least for their dividends) and NOV.
I bought NOV ($74.50 before stock split) when oil was about $58/barrel in March '07.
The company has backlog orders going back almost 5 years. Whether oil drops to $60/barrel or increases to $150/barrel tomorrow, I'll still hold the stock.
I will probably end up selling PWE sometime this year since Canadians will soon start taxing CANROY's. The fat dividends was nice while it lasted.
I've put myself on hold for now on buying most financial companies(AXP, BAC, and others). I'd rather be "late" to a financial rally than too early.
Interesting that BAC is now at the target price I calculated a few months ago.
Their dividend is pretty high and it only makes sense that they will cut it, however Ken Lewis said last week he sees no reason to cut the dividend. They raised $12 billion in January which certainly gives them some legroom unlike the crappy banks like WB and WM. I'm a little confused on the CFC purchase...I think it's a good deal but I expect it to dilute their earnings per share. The question for me at this point in time is not "if" but "when" to step in.
If BAC cuts their dividend, I'll put it on equal footing with WFC, and USB...But currently I still like BAC better than both.
It's seen a nice rise since I bought it at $51.96 in early May last year. I also bought FCX during that period, but I still plan on keeping it.
LUK has been good, and is a little overpriced now, but I'll still hold it.
They're the only company that have demonstrated to me that they can both walk and chew gum at the same time IMO.
My healthcare stocks are doing excellent...GILD, JNJ, TEVA, ESRX, COV, and MR. :thumbsup:
I will still keep PWE(till the end of the year at least for their dividends) and NOV.
I bought NOV ($74.50 before stock split) when oil was about $58/barrel in March '07.
The company has backlog orders going back almost 5 years. Whether oil drops to $60/barrel or increases to $150/barrel tomorrow, I'll still hold the stock.
I will probably end up selling PWE sometime this year since Canadians will soon start taxing CANROY's. The fat dividends was nice while it lasted.
I've put myself on hold for now on buying most financial companies(AXP, BAC, and others). I'd rather be "late" to a financial rally than too early.
Interesting that BAC is now at the target price I calculated a few months ago.
Their dividend is pretty high and it only makes sense that they will cut it, however Ken Lewis said last week he sees no reason to cut the dividend. They raised $12 billion in January which certainly gives them some legroom unlike the crappy banks like WB and WM. I'm a little confused on the CFC purchase...I think it's a good deal but I expect it to dilute their earnings per share. The question for me at this point in time is not "if" but "when" to step in.
If BAC cuts their dividend, I'll put it on equal footing with WFC, and USB...But currently I still like BAC better than both.
What's on your potential shopping list?
My "potential" shopping list so far includes MYL, MDT, GSK, MKL, PGR, BAC, WFC, AXP, MHK, JOE and even SHLD of all companies.
I'm seeing serious valuations in all of them.
Of course the 18 individual stocks already in the portfolio automatically takes priority over any new shopping list as long as they aren't overvalued.
I'm not someone who believes one must have 50+ stocks. I hope to never have more than 20-23.
- Jan 23, 2002
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Originally posted by: her209
Gah!!! Why are my bonds [PTRAX] taking a beating?
That's where I had over 50% of my money from December through June. I still have about 20%-30% of it, decided to move the other in equities.
I wouldn't worry about the day to day fluctuations. Bonds have been falling out of favor the past month... it'll come back and forth... meanwhile, it pays a good dividend and you can't beat Bill, he's the grand daddy of bonds.
IHateMyJob2004
Lifer
- Sep 29, 2004
- 18,656
- 68
- 91
Piggyback Buffet with financials:
BAC
WFC
ACP (I think?)
Toss MDT aside and go after JNJ..... do a DCF and it is easy to understand why Buffet bought it.
ponyo
Lifer
- Feb 14, 2002
- 19,688
- 2,811
- 126
I've two ideas floating right now. One, agricultural commodity rise will continue well into next year. Still looking for entry into DBA. Two, companies like Halliburton, Raytheon, Lockhead, Northrop Grumman are short near end of the year if Obama wins the election which I think he will.
Near term, I'm watching the financials and the betas. As the saying goes, "As go the piggies, so goes the poke." I've always been told to watch the financials as a tell as we can't rise without the banks in this finance based economy and I believe it. Betas are trading relatively dry and markets usually don't bottom until everyone gets hit including the betas. I went short Apple this morning and that's tough way to make money.
I don't believe in diversification so I usually hold only like 5-6 stocks and won't go over 10 max. Some of the names I'm looking at include KMX, GSK, COST, KFT, LUK, BAC, WFC, UNH, WLP, BNI, UNP, GE. Mainly Buffett stocks. Way I look at it is if it's good for Buffett, it's good for me. I'm also watching MA, BIDU, and GS as potential rentals if the market turns.
The additional KO shares I bought earlier are lower than the current price.
I've gained on the additional investment (theoretically at least).
Your theory proves nothing.
I'm already in JNJ.
As I said earlier, my current 18 stocks takes priority over any new purchase if I think they're cheap.
JNJ is my 3rd largest stock holding behind LUK and GILD; and probably the only "pharma" I plan on holding.
They are the only one that seems to make any sense and provide me with a margin of safety.
How many companies do you know have increased dividends consecutively for the past 40 years?
Most pharmas face a "patent cliff" by 2010.
JNJ has the correct business strategy by expanding in the OTC and consumer market.
Pfizer was stupid to sell their consumer health group to JNJ.
I'm interested in MDT mainly because it's cheap especially compared to historical levels, and most of JNJ's stents and medical devices are getting old. Sure JNJ is still making a hefty profit but they're losing some serious market share to MDT in stents.
IHateMyJob2004
Lifer
- Sep 29, 2004
- 18,656
- 68
- 91
Lothar,
Nice to see a real investor pop up once in a while. Most here probably have no idea what margin of safety is.
Nice to see a real investor pop up once in a while. Most here probably have no idea what margin of safety is.
IHateMyJob2004
Lifer
- Sep 29, 2004
- 18,656
- 68
- 91
I already left my defense pick General Dynamics a few months ago(I think I posted it somewhere here before?) in anticipation of a democratic president.
I don't believe in shorting stocks so I wouldn't even try what you're doing.
The current "top 10" individual stocks.
LUK
GILD
JNJ
UNP
KFT
HPQ
NTDOY
WMI
KO
NOV
The "top 10" alone accounts for 68%. The remaining "bottom 8" only accounts for 12%.
Even if I may have 18 (like I do now) or my 20 max limit stocks, I still run a very concentrated portfolio.
I don't see any reason for wide moat diversification.
All the railroads are up significantly, but I still think they have a lot of pricing power left.
At this point though, I'd rather increase my stake in KFT than buy more UNP shares.
Buy good companies at "great" prices.
KFT looks to be approaching <$30 again...Maybe it will get there if the market drops by -200 each the next two days.
IHateMyJob2004
Lifer
- Sep 29, 2004
- 18,656
- 68
- 91
Buy good companies at great prices ..
WEB can but improtant concepts into words so well:
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
Such a simple quote but it says so much. The guy really has a gift with words. If he made a video and sold it such that proceeds went to charity, I would pay in the hundreds of dollars for the video. For a 6 hour video, I would pay $1,000. He won't write a book because there is nothing left to be written that has not been written already (like "The Intelligent Investor"). But if he were to write a book or do a video or anything and donate the proceeds to charity, wouldn't that be wonderful?
I think WEB sold UNP when he bought BNI. For that reason alone, I would only want to buy BNI ... especially if all the railroads are up by about the same percentage.
Well Lothar .... it's actually nice talking to you. Consider the PM I sent you. I think you would liek the forums over there
WEB can but improtant concepts into words so well:
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
Such a simple quote but it says so much. The guy really has a gift with words. If he made a video and sold it such that proceeds went to charity, I would pay in the hundreds of dollars for the video. For a 6 hour video, I would pay $1,000. He won't write a book because there is nothing left to be written that has not been written already (like "The Intelligent Investor"). But if he were to write a book or do a video or anything and donate the proceeds to charity, wouldn't that be wonderful?
I think WEB sold UNP when he bought BNI. For that reason alone, I would only want to buy BNI ... especially if all the railroads are up by about the same percentage.
Well Lothar .... it's actually nice talking to you. Consider the PM I sent you. I think you would liek the forums over there
- Jan 23, 2002
- 2,206
- 12
- 81
You're going to short GE here? Whyyyy? I thought you were a potential buyer... did something change your mind or you're just going with the overall market?
News from the wire:
"GE Execs Dig In as Stock Falters
By Teresa Rivas
SHARES OF GENERAL ELECTRIC (ticker: GE) have continued their slide, but insiders have continued to signal confidence, snapping up $4.5 million in stock in the last two weeks.
On Wednesday Vice Chairman Michael Neal purchased 35,000 shares for $1 million, or $29.99 a share. He now owns 520,154 shares directly and 3,729 shares in his 401(k) plan.
On May 28 Chairman and Chief Executive Officer Jeffrey Immelt purchased 115,000 shares for $3.5 million, an average of $30.63 a share. The purchase was the largest insider buy at GE in ..."
ponyo
Lifer
- Feb 14, 2002
- 19,688
- 2,811
- 126
I'm a potential buyer. Just not right now. GE is a big financial institution. Their finance division smoothed out their earnings in the past. Now it's a liability. $30 broke rather easily and the trend is down. Just trying to play the trend. There's also rumor GE is going to raise capital.
My order didn't get hit.
Don't mind me. I'm just noise in the big picture.
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