Re: [CANSLIM] Re. ROE

From: Spencer48@aol.com
Subject: Re: [CANSLIM] Re. ROE
Date: Thu, 10 Jul 2003 19:54:17 EDT

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Katherine:

     I have noticed-and particularly with hi tech stocks-that go-go stocks=20
without high ROE's generally make up for that with high R&D's (I get both th=
ese=20
info data from DGO). =20

     That is, even though a stock (usu. a hi tech stock, but also a medical=20
tech stock) has a low ROE the fact that it has a high R&D points up to the f=
act=20
that the earnings (which ROE is made up of) are low for this reason, ie. a=20
high R&D.  Also, this applies to the fact that  equity is rising, relatively=
=20
[ie. people and funds wish to invest].  (It would be interesting, by the way=
, to=20
see if fund investing rises in these stocks).

     Although, this is just an impression based on my observations of stocks=
=20
that take off, it would appear to me that stocks in a hi tech industry with=20
high earning GROWTH, and with low ROE but a high R&D, are Canslimish if not=20
officially CANSLIM. =20

     What do you think?

jans


In a message dated 7/9/2003 11:13:38 PM Eastern Daylight Time,=20
kmalm@earthlink.net writes:

<< A: Generally, we will weigh the pluses and minuses if the stock is not a
 perfect fit and "go for it," as you say. ANSI's return on equity is
 currently unreported for 2002, but 2001 came in at 5.4%, which is an
 improvement over 2000's 2.1% return on equity. In this case, given that all
 other factors are fairly strong, we would accept the fact that return on
 equity is improving, although it does not meet the optimal level we would
 prefer. However, if we compared ANSI with, for example, ZMH, another stock
 in the same group, we might decide to choose ZMH based on its 115.9% return
 on equity, assuming all other factors are equal and ZMH is at a proper buy
 point. The other example you cite, JEC, is showing a return on equity of
 17.1% =E2=80=94 very strong and very desirable =E2=80=94 but earnings are g=
rowing in the
 mid-teens over the past four quarters. However, we might take into account
 the fact that JEC is a steady earnings performer, something that is at a
 premium in the current environment, and may benefit from current trends in
 that industry. So, again, we are weighing pluses and minuses and "going for
 it." >>

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