Re: [CANSLIM] Fw: Ken Kam's Market Outlook

From: "Gary A. Snyder" <gas175k@hotmail.com>
Subject: Re: [CANSLIM] Fw: Ken Kam's Market Outlook
Date: Sun, 28 Jul 2002 14:03:21 -0400
Next Article (by Author): Re: [CANSLIM] Fanus - CTSH "Tom Worley"
Previous Article (by Author): RE: [CANSLIM] Intro: Jeffrey Gasta "Edward McDonough"
Top of Thread: [CANSLIM] Fw: Ken Kam's Market Outlook "Tom Worley"
Articles sorted by: [Date] [Author] [Subject]
>From: "Tom Worley" <stkguru@bellsouth.net>
>Reply-To: canslim@lists.xmission.com
>To: "CANSLIM" <canslim@lists.xmission.com>
>Subject: [CANSLIM] Fw: Ken Kam's Market Outlook
>Date: Sun, 28 Jul 2002 13:22:53 -0400
>
>This letter comes to me from the site where I maintain my VR Fund, have 
>read
>it several times, and it continues to make sense to me, even after spending
>some time reading this morning about how the CEO of HPLA has disappeared,
>and the company now says that the cash reported in past qtrs has not been 
>in
>possession of the company, nor is likely ever to be (last report nearly $60
>million, up from under $1 million a year ago). Always amazes me how 
>analysts
>and brokerage houses can miss such trivial details before making buy
>recommendations.
>
>----- Original Message -----
>From: "Marketocracy"
>To: <stkguru@bellsouth.net>
>Sent: Tuesday, July 23, 2002 2:14 AM
>Subject: Ken Kam's Market Outlook
>
>
>Market Outlook
>July 22, 2001
>
>Largely precipitated by accounting scandals at Worldcom and Enron,
>the public flogging of corporate CEOs, both from Congress and the
>President, may be backfiring. Instead of giving reassurance that the
>mess will be cleaned up, it has actually convinced many people that
>most of corporate America is dishonest.
>
>These high profile scandals guarantee that more government regulation
>is forthcoming. The new proposals sound great at first blush. After
>all, who would oppose sending corporate executives to jail when they
>knowingly release misleading financial information? However, no
>amount of regulation will make equity investing a risk-free endeavor.
>And bad regulation could make the problem worse.
>
>Ultimately, though, stock prices are about corporate earnings and
>their prospects for future growth, and as I see it, the earnings
>outlook is improving.
>
>    --> Earnings are rising
>According to Thomson Financial/First Call, of the 221 S&P 500
>companies that have reported their results for the second quarter,
>59.7 percent beat Wall Street's earnings expectations, 28.1 percent
>matched projections and only 12.2 percent fell short of consensus
>targets. Many companies are reporting upside surprises in the second
>quarter, but have given cautious guidance for the rest of the year.
>In our view, the third quarter is showing signs of significant
>improvement, but CEO's don't want to stick their necks out.  I
>suspect this is because many executives are unwilling to expose
>themselves to the risk of being prosecuted for honest mistakes.
>
>    --> P/Es look reasonable
>Despite rising earnings and falling stock prices, many believe that
>the market is still expensive because the S&P 500's current
>price-to-earnings ratio is still above historic averages. However, I
>believe that Greenspan's model is a better gauge of the market's
>value because it takes interest rates into consideration.
>According to Barron's, the Fed Model, as it is known, now suggests
>that the S&P 500 is 30% undervalued. This model, which compares the
>yield on the 10-year Treasury with the so-called earnings yield on
>the S&P 500, suggests fair value for the S&P 500 of about 1200.
>Barron's also notes that other, more sophisticated models indicate
>the S&P 500 is undervalued to an even greater extent.
>
>    -->  Earnings doubts?
>Leading up to the August 14 deadline for CEOs to personally sign-off
>on their financial statements, the risk of more scandals raises doubt
>about earnings estimates. But consider this -- the S&P 500's total
>projected earnings for the year ending next March is $495 billion.
>According to Barron's estimates using the Fed model, earnings could
>decline by 30 percent -- or $148 billion --  and the market would
>still be fairly valued. Getting to this level would require the
>unlikely revelation of 39 additional Worldcom size restatements of
>$3.8 billion.
>
>Offsetting further restatements is the possibility that earnings
>growth is stronger than anyone currently expects. I take solace in
>Greenspan's recent testimony to Congress:
>
>"We do have a set of profits data which, for all practical purposes,
>are free of spin. ... [The national income and product accounts
>numbers] are improving fairly dramatically, as indeed they must
>because the necessary implications of productivity growth at a 7
>percent annual rate in the average of the fourth and first quarters
>is very difficult to engender without a very major increase in
>operating earnings. And, indeed, that's exactly what is happening."
>
>Translation: Behind all the spin, profits are improving dramatically.
>
>    -->  Summary
>It is impossible to pick a bottom in the market. History teaches that
>if you are prepared to ride out the short-term then the long-term is
>safe. Some of the best investors I know are buying equities now
>because they don't expect stocks to fall much further given forecasts
>for an economic recovery.
>
>The potential for new revelations of corporate fraud makes the market
>look and feel grim right now. But I don't think fraud is so
>widespread as to justify the significant plunge in all major indices.
>I believe that the sensational headlines about today's wrongdoers
>represent a tiny fraction of the publicly traded companies. The
>overwhelming majority of managements are honest and trustworthy even
>when "nobody is looking." We should invest accordingly.
>
>Ken Kam
>President and CEO
>Marketocracy, Inc.
>July 22, 2002
>
>
>
>
>
>
>-
>-To subscribe/unsubscribe, email "majordomo@xmission.com"
>-In the email body, write "subscribe canslim" or
>-"unsubscribe canslim".  Do not use quotes in your email.

Right on Tom:
A quick look at WSJ Online has a item 0n July 22: HPA Technology has found 
massive accounting fraud involving fictitious transactions and falsified 
documents orchestrated by former CEO and founder David Leperjian and an 
update dated July 25 with HPLA rating moving from 1.3 to 1 with five 
analysts rating the company strong buy.  Gary


_________________________________________________________________
MSN Photos is the easiest way to share and print your photos: 
http://photos.msn.com/support/worldwide.aspx


- -
- -To subscribe/unsubscribe, email "majordomo@xmission.com"
- -In the email body, write "subscribe canslim" or
- -"unsubscribe canslim".  Do not use quotes in your email.
Go to Jeff Salisbury LWGate Home Page.