Re: [CANSLIM] Ask Bill--Does anybody really ask these questions?

From: Warren Keuffel <wkeuffel@xmission.com>
Subject: Re: [CANSLIM] Ask Bill--Does anybody really ask these questions?
Date: Sun, 25 Aug 2002 13:28:08 -0600

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As a writer myself, I can offer at least one possible answer: IBD has
some lazy writers on staff, writers too lazy to go dig up their own
stories.

Warren

Katherine Malm wrote:

> Here is today's "Ask Bill" column. Sound familiar?
> Question: Can you please define "swing trader"?
>
> - Submitted from Texarkana, Texas
>
> Answer: A swing trader is one who trades short-term "swings" in the
> market, stocks, options, etc. that last anywhere from a few days to
> just a few weeks.   I'd sure like to know why so often these questions
> are exactly the same topics that appear on our email list. Why pick up
> on stuff like this and make up bogus "Ask Bills" when I've still got
> at least 2 questions asked of them and never answered (I'm sure there
> are others who've written questions that aren't answered). For
> example, why the heck does the IBD calculate the ROE based on the
> average of 2 years data? Huh? Since when did anybody use 2 years for
> such a measurement? Here's the Ask Bill I'm referring to (highlighting
> is mine): Ask Bill O'Neil Archives
> Wednesday, August 21, 2002
>
> "Why is it some stocks showing accelerating earnings and sales growth
> still have relatively low return on equity? Would you make an
> exception to your rule of buying stocks with ROE of 17% or better?"
> - Submitted from Montgomery, Texas
>
> One possible reason is the fact that IBD's measure of ROE (return on
> equity) takes an average of the ROE over the past two fiscal years. If
> a company posted weak earnings or a loss in the previous year, that
> would dilute its ROE. Also keep in mind that ROE measures total
> operating earnings divided by shareholders' equity. So even when the
> year-over-year EPS growth is accelerating, if earnings per share are
> small (say, only 4 or 8 cents), it may result in a relatively small
> numerator in the ROE equation. This is why the best growth companies
> with strong ROE tend to show strong growth over several years, not
> just in a number of quarters. Regarding the rule of having ROE of at
> least 17%, keep in mind that some of the best stocks had an ROE less
> than that, including Emulex (8% before its big price run-up beginning
> in December 1998), Millennium Pharmaceuticals (7%) and Qualcomm (8%).
> But on average, the best stocks during the 1997-2000 period sported an
> average ROE of 23%.  --Katherine


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