Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: Re: [CANSLIM] SYK
Date: Wed, 20 Mar 2002 10:56:18 -0600
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Hi Charley,
WON's studies from 1953 to 1985 showed that the average trailing PE for =
great growth stocks was 20. When they peaked, they averaged a trailing =
PE of 45, 2.25 the original levels. They then screened the best stocks =
going into the market peak in March 2000 and found that the average PE =
when they broke out was 44.8. When they peaked, they averaged a PE of =
99.6, surprisingly, 2.2 times their PE on breakout. (Investor's Corner =
6/9/00) His conclusion is that this does give some range of expectation =
for PE expansion during the stock's run.
One way I like to evaluate the industry is to look at the current PEs =
relative to 5 year highs and lows. 5 years is often enough to catch at =
least one and in some cases, more than one economic/market cycle. And I =
wholeheartedly agree with you that comparing forward and/or trailing PEs =
of a stock relative to its industry/direct competitors is a great way to =
see if expectations are already built into the current price. I also =
like to compare the stock's ROE against others in the same industry, as =
it gives a measure of their relative ability to generate return on =
capital employed.
It would be great to see the results from your study.
Katherine
----- Original Message -----=20
From: Duke Miller=20
To: canslim@lists.xmission.com=20
Sent: Wednesday, March 20, 2002 10:35 AM
Subject: RE: [CANSLIM] SYK
Charley,
The results of your study would be very interesting to the group, I'm =
sure.
Duke
-----Original Message-----
From: owner-canslim@lists.xmission.com =
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Chazmoore@aol.com
Sent: Wednesday, March 20, 2002 7:00 AM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] SYK
Tom: A few months ago one of the TV "bears" commented that a stock =
market recovery could not occur until the P/E ratio's fell =
significantly. In other words, stock prices are too high, or earnings =
too low. He noted that the S&P 500 Index P/E was (at the time) 28. Since =
I don't trust the S&P 500 Index averages I started to research the P/E =
ratio of Industry Groups, as defined by IBD. I am far from complete but =
my initial findings indicate that, with the exception of the technology =
sector, average P/E's really are not that high. Credit card companies =
like Capital One Finance (COF), and MBNA (KRB), have an average P/E of =
about 22; 8 points below the current S/P Index average.=20
So, what is the point? I use this to determine if the stock P/E is =
in line with it's own industry. It could also be used to determine a =
target price to sell the stock in the future. While there are notable =
exceptions, (CSCO, QCOM, JDSU), most stocks get downgraded when they hit =
P/E ratios inconsistent with analyst projections, and this causes a =
price decline.=20
(Maybe I have more time than sense.)=20
Charley=20
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<BODY bgColor=3D#ffffff>
<DIV>Hi Charley,</DIV>
<DIV> </DIV>
<DIV>WON's studies from 1953 to 1985 showed that the average trailing PE =
for=20
great growth stocks was 20. When they peaked, they averaged a trailing =
PE of 45,=20
2.25 the original levels. They then screened the best stocks going into =
the=20
market peak in March 2000 and found that the average PE when they broke =
out was=20
44.8. When they peaked, they averaged a PE of 99.6, surprisingly, 2.2 =
times=20
their PE on breakout. (Investor's Corner 6/9/00) His conclusion is that =
this=20
does give some range of expectation for PE expansion during the stock's=20
run.</DIV>
<DIV> </DIV>
<DIV>One way I like to evaluate the industry is to look at the current =
PEs=20
relative to 5 year highs and lows. 5 years is often enough to catch at =
least one=20
and in some cases, more than one economic/market cycle. And I =
wholeheartedly=20
agree with you that comparing forward and/or trailing PEs of a stock =
relative to=20
its industry/direct competitors is a great way to see if expectations =
are=20
already built into the current price. I also like to compare the stock's =
ROE=20
against others in the same industry, as it gives a measure of their =
relative=20
ability to generate return on capital employed.</DIV>
<DIV> </DIV>
<DIV>It would be great to see the results from your study.</DIV>
<DIV> </DIV>
<DIV>Katherine</DIV>
<BLOCKQUOTE dir=3Dltr=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3Ddukemill@tampabay.rr.com =
href=3D"mailto:dukemill@tampabay.rr.com">Duke=20
Miller</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Wednesday, March 20, 2002 =
10:35=20
AM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> RE: [CANSLIM] =
SYK</DIV>
<DIV><BR></DIV>
<DIV><SPAN class=3D638063516-20032002><FONT=20
face=3DArial>Charley,</FONT></SPAN></DIV>
<DIV><SPAN class=3D638063516-20032002><FONT=20
face=3DArial></FONT></SPAN> </DIV>
<DIV><SPAN class=3D638063516-20032002><FONT face=3DArial>The results =
of your study=20
would be very interesting to the group, I'm sure.</FONT></SPAN></DIV>
<DIV><SPAN class=3D638063516-20032002><FONT=20
face=3DArial></FONT></SPAN> </DIV>
<DIV><SPAN class=3D638063516-20032002><FONT =
face=3DArial>Duke</FONT></SPAN></DIV>
<BLOCKQUOTE=20
style=3D"PADDING-LEFT: 5px; MARGIN-LEFT: 5px; BORDER-LEFT: #000000 2px =
solid">
<DIV class=3DOutlookMessageHeader dir=3Dltr align=3Dleft><FONT =
face=3DTahoma=20
size=3D2>-----Original Message-----<BR><B>From:</B> <A=20
=
href=3D"mailto:owner-canslim@lists.xmission.com">owner-canslim@lists.xmis=
sion.com</A>=20
[mailto:owner-canslim@lists.xmission.com]<B>On Behalf Of </B><A=20
=
href=3D"mailto:Chazmoore@aol.com">Chazmoore@aol.com</A><BR><B>Sent:</B>=20
Wednesday, March 20, 2002 7:00 AM<BR><B>To:</B> <A=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
<BR><B>Subject:</B>=20
Re: [CANSLIM] SYK<BR><BR></FONT></DIV><FONT =
face=3Darial,helvetica><FONT=20
size=3D2>Tom: A few months ago one of the TV "bears" commented that =
a stock=20
market recovery could not occur until the P/E ratio's fell =
significantly. In=20
other words, stock prices are too high, or earnings too low. He =
noted that=20
the S&P 500 Index P/E was (at the time) 28. Since I don't trust =
the=20
S&P 500 Index averages I started to research the P/E ratio of =
Industry=20
Groups, as defined by IBD. I am far from complete but my initial =
findings=20
indicate that, with the exception of the technology sector, average =
P/E's=20
really are not that high. Credit card companies like Capital One =
Finance=20
(COF), and MBNA (KRB), have an average P/E of about 22; 8 points =
below the=20
current S/P Index average. <BR>So, what is the point? I use this to=20
determine if the stock P/E is in line with it's own industry. It =
could also=20
be used to determine a target price to sell the stock in the future. =
While=20
there are notable exceptions, (CSCO, QCOM, JDSU), most stocks get =
downgraded=20
when they hit P/E ratios inconsistent with analyst projections, and =
this=20
causes a price decline. <BR>(Maybe I have more time than sense.)=20
<BR><BR>Charley=20
=
<BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR></BLOCKQUOTE></BL=
OCKQUOTE></FONT></FONT></BODY></HTML>
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