Go to Jeff Salisbury LWGate Home Page.From: Spencer48@aol.com
Subject: Re: [CANSLIM] SYK
Date: Wed, 20 Mar 2002 14:30:38 EST
Previous Article (by Subject): Re: [CANSLIM] SYK Chazmoore@aol.com
Top of Thread: RE: [CANSLIM] SYK "Duke Miller"
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Katherine:
Your E-mail on P/E reminded me that WON sometimes uses the P/E ratio to=
=20
guage when to sell the stock. Here is what he said June 4, 2001 in Ask WON=20
(on investors.com) regarding P/E vis =E0 vis selling: =20
"Your sell rules are the principal guide on when to take a profit. But=20
sometimes we use the price/earnings ratio to calculate a price where you may=
=20
exit a stock. Basically, you may start considering selling when the stock's=20
PE ratio expands 130% from the time it broke out from a first-stage base.=20
Example: XYZ stock's PE (or p/e ) ratio is 45 when it breaks out. Calculatin=
g=20
a 130% expansion, you get a PE of 103.5 [45*1.3 +original45PE]]. Next, you=20
take the next year's expected earnings per share and calculate the target=20
price from the estimated EPS. If the estimated EPS is $2, the target price=20
would be $207 ($2 x 103.5). However, you should use this method only with th=
e=20
No.1 stock in a group and only in a first-stage base."
jans=20
In a message dated 3/20/2002 11:55:41 AM Eastern Standard Time,=20
kmalm@earthlink.net writes:
<< 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=
=20
45, 2.25 the original levels. They then screened the best stocks going into=20
the market peak in March 2000 and found that the average PE when they broke=20
out was 44.8. When they peaked, they averaged a PE of 99.6, surprisingly, 2.=
2=20
times their PE on breakout. (Investor's Corner 6/9/00) His conclusion is tha=
t=20
this does give some range of expectation for PE expansion during the stock's=
=20
run. >>
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