Go to Jeff Salisbury LWGate Home Page.From: "Tom Worley" <stkguru@bellsouth.net>
Subject: Re: [CANSLIM] Rose Colored Goggles?
Date: Wed, 21 Aug 2002 01:47:58 -0400
Next Article (by Date): Re: [CANSLIM] Too many CANSLIMers? "Tom Worley"
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jans, I did a fast run thru of the charts, and want to first comment on one
of your comments, that being that only AMSG has good earnings and sales.
MCO - EPS 96, last 4 qtrs earnings up 24% to 53%, forecast this year up 35%,
next 12%
HRB - EPS 95, last 4 qtrs from "N/A" to plus 50% (N/A qtrs were smaller
losses), forecast up 17% and 11%
BOYD - EPS 44 (ugly but explainable due losses past two years), last 4 qtrs
from "N/A" to plus 500%, no forecast
PIXR - EPS 93, last 4 qtrs from minus 65% to plus 88%, last two qtrs both
nice gains, forecast up 93% and 15%
AMSG - EPS 99, last 4 qtrs plus 27% to plus 53%, forecast 46% and 22%
I didn't write down all the sales growth data, but think almost every qtr
for each of them was showing growth, mostly double digit, and in most cases
over 20%, growth year over year.
In a good "M", and a strong economy, these earnings and sales growth would
still put them well over average. In the poor "M" we have at present, and a
weak (but recovering IMO) economy, they put them on the top of the heap.
Their groups were all mostly top rated groups, B+ or better, with the sole
exception of HRB rated at D.
Moody's makes some sense to me if you believe (as I do) that major corps are
starting to get more confident about spending money on productivity related
upgrades of equipment and software. With interest rates low, more of the big
corps will be looking to do more debt issue, and Moody's will benefit from
that. Sales there are up 24% to 37%, and may be a stealth indicator to what
big corporate America may be quietly doing, issuing new debt at lower
interest rates while redeeming older higher interest bonds (or quietly
buying them back). Much like homeowners refinancing, this means lower debt
service in the future, more cash flow, lower expenses, etc. And more capital
for equipment purchase, acquisitions, etc.
HRB has been trying for some years, without notable success, to diversify
enough to smooth out their seasonal sales and earnings. Don't know that they
can ever succeed without some significant acquisitions (I still think EPIQ
would be an excellent acquisition for them, so long as it is at a huge
premium!!!)
the rest I don't have much thoughts on, other than all are big caps, which
seems to me to not be the best place to invest right now unless you are a
big fund / money manager and looking for a place to dump millions of dollars
at a time.
chart wise, I didn't find any of these to be particularly distasteful, nor
did I find any of them screaming at me to buy (assuming I could tolerate a
big cap stock). I do agree that the RS line by itself was not saying much
long term, but I also didn't see them waving red flags at a quick glance.
The RS line for the DOW and the NYSE Comp are both trending upward slowly
and steadily, just what I would like to see in today's climate. RS line for
Naz and R2000 much more shaky, but also what I would expect right now given
the past 10 weeks performance.
As I said in one of my recent posts, we have seen higher lows on all
indexes, but I need to also see higher highs on the indexes before I will
believe we are in a rally, much less have finally seen the true bottom.
Well, we now have higher highs on the DOW, NYSE Comp, Naz 100, Naz Comp,
NYSE Financials, S&P Mid Cap 400, S&P 500, and S&P 600. Russell 2000 is one
significant omission from this list for me, but I personally have seen good
results (margin acct up 14% in two days, for example, and VR Fund kicking
all the indexes again) so may just be a matter of days for it to join the
crowd. So, yes, I think we are in rally mode, but too early to say whether
just a bull rally in a bear market, or that we have finally bottomed, or if
so that we now have started a brand spanking new baby bull market (what's a
baby bull, calf??).
I have long held that the overall economics (which I believe ultimately
drive corp earnings) are much better (and recovering) than what you would
believe from either listening to airhead commentators, or looking at the
stock market. I strongly suspect a lot of the underperformance of the stock
markets compared to the economy is due to foreign investment dollars being
withdrawn, which also weakens the dollar. At the moment, I believe that this
cash flow is back to neutral, if not already positive, in part because where
else are investors going to park their money where they feel safer? If
confidence in US markets returns (and the corp governance issues are a big
part of this, e.g. CEO/CFO certifications news, along with well known
analysts touting stocks while simultaneously trashing them internal to their
brokerage house) then the rush of capital back into US markets, both from
foreign investors as well as cash still sidelined here in USA, could be
huge.
I deliberately did not focus much on the current RS lines of these stocks
because RS is weighed more heavily on the latest time period, and lately
these stocks, like most others, have done poorly. On the other hand, because
RS is weighted heavily on the recent term, a sharp trend up short term can
rapidly change the RS #, and line, into a very respectable presentation.
Given that their respective EPS rating is already at or near the top of the
scale (and that takes far longer both to build to those levels as well as
deteriorate from there, but recent qtrs suggest the latter is not going to
happen), and group RS is quite high as well for all but one, then I would
have to applaud IBD for once presenting a topic in terms of what is
happening right now, rather than six months or two years ago.
Sorry jans, but guess I am back into my more normal bullish, and contrarian,
stance. Maybe I want a rally even more than IBD (actually I already have
one, just want it to keep going).
- ----- Original Message -----
From: <Spencer48@aol.com>
To: <canslim@lists.xmission.com>
Sent: Tuesday, August 20, 2002 8:44 PM
Subject: [CANSLIM] Rose Colored Goggles?
Canslimmers:
This is a passage from Wednesday's. Big Picture:
"Despite the skittishness, emerging leaders performed well.
Moody's (MCO) broke out of an eight-week base. The bond-rating stock popped
up 1.08 to 50.78. Volume expanded 53% above normal. Moody's most recent
consolidation isn't as tight as its January-to-April base, which led to a
24%
gain. But the company's fundamentals still look good. Moody's grew profit
44%
in the latest quarter as sales rose 32%.
H&R Block (HRB) followed through on Friday's breakout. The tax stock rallied
1.80 to 53.15 in above-average volume. The company's fundamentals are a
little lumpy, given the once-a-year nature of the tax business. But it still
scores a 95 Earnings Per Share Rating. That means its growth is better than
95% of stocks on the market.
Boyd Gaming (BOYD) resumed its breakout late in the session. The stock added
0.62 to 16.68. Volume swelled 138% above its 50-day average.
Pixar (PIXR) marched higher for the fifth day in a row. The animated feature
producer has gained almost 15% since charging past its pivot point at 44.30
on Aug. 14.
AmSurg (AMSG), which hit its first new high in 2 1/2 months on Monday,
pulled
back 1.03 to 32.02. Volume for the outpatient clinic stayed heavy."
THESE ARE CONSIDERED THE LEADERS BY IBD???? Only AMSG has decent
earnings and sales. Its formation is nice, but its RS-line (not the rating)
is lower than its previous price high. All the others have lousy earnings
and some have lousy charts in addition to lousy earnings.
Moreover, I get the impression that IBD feels that we are in a rally.
However, when you look at the major indexes (Dow, NASDAQ, Russel 2000, S&P
500 and 600) all of them have RS lines going lower as they roll higher. So
if this is a rally, I don't think it will last too long.
This is just my opinion, but it would be nice if IBD and/WON addressed
these divergences. My impression is that IBD/WON wants a rally so much that
their wishes are father to the reality.
Am I wrong? Katherine and Tom-or anyone who cares to comment-how do
you
see the big picture?
jans
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