In 2011, S&P 500 profits expanded 15%. And yet, the benchmark’s price finished in the very same place that it started the year. In essence, since prices flat-lined and earnings experienced double-digit growth, a fundamentally inexpensive stock market via the price-to-earnings ratio (P/E) became even cheaper.
The most common reason cited for P/E contraction in 2011? The Euro Zone debt crisis.
Obviously, sovereign [...] Continue Reading...
Popular emerging markets in the BRIC configuration – Brazil, Russia, India, China – suffered through severe bear markets in 2011. Yet far too many writers attribute the 20%-33% declines to Europe’s sovereign debt crisis alone.
It is true that the debt mess sent the U.S. dollar higher at the expense of the ruble, “real,” and the rupee. Contagion containment has also damaged the prospects for emerging market [...] Continue Reading...
Is it possible that commentators have underestimated Warren Buffett’s flexibility? Indeed, the Oracle of Omaha is best known for buying the cheapest names on “boring” brand name institutions, like Coca-Cola (KO), American Express (AXP) and Procter & Gamble (PG). He rarely showed interest in anything remotely “tech.”
Yet during the summer of our discontent — when technology shares plummeted alongside double-dip recession fears [...] Continue Reading...
Many folks are “banking” on a year-end rally. The catalyst? The European Union (EU) will come up with a massive recapitalization (a.k.a. bailout) of their financial institutions.
In theory, if we no longer need to fret the collapse of the EU — the solvency of member nations, the functionality of its banks, etc. – investors should be able to return to corporate earnings. And most should like [...] Continue Reading...
On 8/2/11, the same day that President Obama signed a bipartisan bill to raise the debt ceiling, the stock market floor collapsed. Specifically, the S&P 500 closed below its 200-day moving average — a technical trendline for stock buying support.
Indeed, the heralded benchmark of U.S. stocks hadn’t finished below its 200-day MA since last September. Equally disconcerting, [...] Continue Reading...
One of the “constant” declarations of the current earnings season? Of those reporting, roughly 3/4 of corporations exceeded profit-per-share estimates.
On the other hand, it’s not uncommon for 2/3 to 3/4 of companies to beat lowered expectations; key executives help to create “beatable” numbers. In addition, each of 8 major economic sectors typically have corporations that, historically speaking, raise the earnings-per-share [...] Continue Reading...
Roughly one hour before bond and stock markets closed on Monday, 7/25/11, congressional Democrats expressed that the House Republican debt plan was a “non-starter” in the Senate. Wince! Six hours later, President Obama spoke to the American people about a potential catastrophe that could see interest rates on credit cards, mortgages and car loans skyrocket. [...] Continue Reading...
In the last month, both Linked In (LNKD) and Pandora (P) came to the New York Stock Exchange with an enormous amount of fanfare. Both IPOs held out the promise of a new appreciation for the future of business. And yet, each IPO currently resides below the lowest price on the first day that shares traded.
The low for LNKD on its first day on the [...] Continue Reading...
Until recently, scores of gurus had questioned the sector rotation into non-cyclical sectors. April jobs numbers were “phenomenal” and corporate earnings were sensational. Why should investors sell in May and go away?
Yet telecom, health care and consumer staples (e.g., toothpaste, peanut butter, etc.) were rocketing up the relative strength percentile rankings. And many analysts explained that the April-May [...] Continue Reading...
It wasn’t that long ago when I criticized terms such as “overbought” and “undervalued.” (See April’s Going Global: Rethinking the Overbought Concept.) In essence, I explained why investors may give more credence to powerful-sounding words than they give to common sense information.
With that said, you should look at a sector’s P/E ratio and compare it against the sector’s P/E [...] Continue Reading...
