Re: Pearl of Wisdom (was [CANSLIM] CCR - I offer this up for dissection)

From: "Tom Worley" <stkguru@bellsouth.net>
Subject: Re: Pearl of Wisdom (was [CANSLIM] CCR - I offer this up for dissection)
Date: Tue, 13 Aug 2002 22:05:50 -0400

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I disagree, Harvey, we are talking about a snapshot in time, doesn't matter
for that purpose if the forecasts prove to be real or imaginary. If the
investing community, right now, perceive them to be real (or even likely)
and they are far superior to the rest of the industry group, or the market
at large, then they can create an expectation. If those expectations later
start to be questioned, then the charts will warn you with other companies
reducing forecasts, reporting below expectations, price lines on charts
trending down, etc.

While I don't give any weight to trailing PEs, I do look at the actual
earnings for apparent trends (especially sequentially), and also take note
where forecasts were then available how they compare to what was then
expected. I also apply the "logical" test to any forecasts, including seeing
what they must do for the remainder of the year just to make forecasts.

- ----- Original Message -----
From: "Harvey Brion" <hbrion@ieee.org>
To: <canslim@lists.xmission.com>
Sent: Tuesday, August 13, 2002 4:18 PM
Subject: Re: Pearl of Wisdom (was [CANSLIM] CCR - I offer this up for
dissection)


A caution here, it's good to keep in mind that trailing PE ratios at least
are
"real," while projected PE ratios are only as good as the earnings forecasts
and
can be way off, especially beyond the current quarter and FY.  This risk is
reduced somewhat for older/larger companies that have a history of making or
exceeding the quarterly earnings forecasts, so called "positive surprises."

That said, I consider both trailing and projected PEs in my stock selection.


> <snip>
> And that's why looking at trailing PE ratios is a waste of time, they are
> merely history, no one is likely to react to them. On the other hand,
> forecasts / projected PE ratios can create a sense of expectation, hence
> drive the price to where the stock trades at a premium based on that
> expectation.
> <snip>


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