Posts Tagged ‘buy and hold’

STOCKS ARE CHEAP, BUT THIS METRIC DOESN’T WORK?

STOCKS ARE CHEAP, BUT THIS METRIC DOESN’T WORK?

Courtesy of The Pragmatic Capitalist 

WHEN PEOPLE THINK OF IMPORTANT JOBS THAT CAN NOT BE LEFT OUT OF OUR LIVES THEY DO NOT NORMALLY THINK OF WASTE COLLECTORS. BUT DURING A HAULERS STRIKE GARBAGE PILES UP AND BEGINS TO SMELL. THERE IS NOWHERE TO PLACE IT ALL AND PESTS RUN RAMPANT AS THEIR AVAILABLE FOOD BECOMES ABUNDANT. DUMPSTERS OVERFILLED TRASH WASTE HAULER STRIKE

I’ll be frank – I have a special place in my heart for the PE ratio and it is the same place where all the things I hate are stored.  This simple to understand metric has, in my opinion, resulted in more misguided Wall Street thinking than just about any metric in existence.  A quick glance at the breakdown of the PE ratio shows serious flaws at work here.  It is basically a moving price target (which is never correct unless you still believe in EMH) divided by the earnings estimates that are created by analysts who have literally no idea where future earnings will be.  In other words, you might as well pick random numbers out of a hat and divide them and then go buy or sell stocks.  Naturally, proponents of the PE ratio will say that you shouldn’t use forward PE’s, but to those people I have to respond: do you always drive through your rear view mirror?  The numerator (or market price in the PE equation) could care less about past earnings so it’s less than helpful in telling us where future prices might go.

What disgusts me even more about this metric is its incessant use in selling buy and hold strategies.  You can’t read a book on value investing or buy and hold without running into the PE ratio.  “The market is cheap – stocks for the long-run!”  You’ve probably seen this slogan on every mutual fund pamphlet you’ve ever read.  Your stock broker no doubt thinks the market is “cheap” right now.  The PE ratio has become the sales pitch of an entire generation of sales people who are just herding small investors into fee based products.  “Did you know Warren Buffet is a value investor?”  “Just buy cheap stocks and hang on.  Your status on the list of the world’s richest is in the making!”  Or so goes the old sales pitch.

So, I wasn’t surprised to open Yahoo Finance this morning to see the following headline arguing that stocks are cheap according to the PE ratio.  But just two articles down is an article from the WSJ arguing that the PE ratio doesn’t work in this environment.  You can’t make this stuff up.  According to the article:

“Not only is the P/E


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Zero Hedge

Fentanyl-Related Deaths Double In Six Months; Officials Warn The Third-Wave Will Be A "Crisis"

Courtesy of ZeroHedge. View original post here.

According to the CDC’s Mortality and Morbidity Weekly Report, the number of overdose deaths involving fentanyl and fentanyl analogs doubled in the last several years.

The third wave of the opioid epidemic is here, as new synthetics [fentanyl analogs] that are 10,000 times as potent as morphine and used to tranquilize elephants are attributing to the latest surge in deaths. ...



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Phil's Favorites

Why Comcast and Disney's bidding war for Sky has reached astronomical heights

 

Why Comcast and Disney's bidding war for Sky has reached astronomical heights

Courtesy of John Colley, Warwick Business School, University of Warwick

The bidding war between Comcast and Disney for European pay-TV giant Sky’s operations seems to have paused at Comcast’s latest bid. But not before reaching astronomical heights, reflective of the dubious thinking that is driving a lot of mergers and acquisitions at the moment.

Bidding by the two major US entertainment businesses for Sky had reached US$34 billion – with Comcast trumping Disney’s previous bid in the region of US$32 billion. This is ...



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Chart School

Small Caps Enjoy Best of Action

Courtesy of Declan.

There wasn't a whole lot going on today except Small Caps were able to attract some buyers despite finishing below resistance; bulls have been taking advantage of the 20-day MA test. Today's action coincided with 'buy' signals in the MACD and +DI/-DI.


The S&P held its breakout and today's losses - despite higher volume selling - didn't do a whole lot of damage.

...

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Insider Scoop

Comcast Ends Pursuit Of Fox Assets, Will Focus On Sky

Courtesy of Benzinga.

Related CMCSA 'Convergence' Is Key: Credit Suisse Weighs In On The Telecom And Media Sector Raymond James: AT&T To Suffer Extend...

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Digital Currencies

Citadel CEO Says Bitcoin Still A "Head Scratcher" But Billionaire Lasry Sees $40,000 Soon

Courtesy of ZeroHedge. View original post here.

Ken Griffin, the CEO and founder of the Citadel hedge fund, has reiterated his negative stance on Bitcoin (BTC) in an interview with CNBC this morning.

Speaking at the Delivering Alpha Conference in New York, ...



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Biotech

How summer and diet damage your DNA, and what you can do

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

How summer and diet damage your DNA, and what you can do

Bright sun and fatty foods are a bad recipe for your DNA. By Tish1/shutterstock.com

Courtesy of Adam Barsouk, University of Pittsburgh

Today, your body will accumulate quadrillions of new injuries in your DNA. The constant onslaught of many forms of damage, some of which permanently...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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ValueWalk

Buffett At His Best

By csinvesting. Originally published at ValueWalk.

Bear with me as I share a bit of my history that helped me create SkyVu and the Battle Bears games. The University of Nebraska gave me my first job after college. I mostly pushed TV carts around, edited videos for professors or the occasional speaker event. One day, Warren Buffet came to campus to speak to the College of Business. I didn’t think much of this speech at the time but I saved it for some reason. 15 years later, as a founder of my own company, I watch and listen to this particular speech every year to remind myself of the fundamentals and values Mr. Buffett looks for. He’s addressing business students at his alma mater, so I think his style here is a bit more ‘close to home’ than in his other speeches. Hopefully many of you find great value in this video like I have. Sorry for the VHS...



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Kimble Charting Solutions

The Stock Bull Market Stops Here!

 

The Stock Bull Market Stops Here!

Courtesy of Kimble Charting

 

The definition of a bull market or bull trends widely vary. One of the more common criteria for bull markets is determined by the asset being above or below its 200 day moving average.

In my humble opinion, each index above remains in a bull trend, as triple support (200-day moving averages, 2-year rising support lines, and February lows) are still in play ...



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Members' Corner

Cambridge Analytica and the 2016 Election: What you need to know (updated)

 

"If you want to fundamentally reshape society, you first have to break it." ~ Christopher Wylie

[Interview: Cambridge Analytica whistleblower: 'We spent $1m harvesting millions of Facebook profiles' – video]

"You’ve probably heard by now that Cambridge Analytica, which is backed by the borderline-psychotic Mercer family and was formerly chaired by Steve Bannon, had a decisive role in manipulating voters on a one-by-one basis – using their own personal data to push them toward voting ...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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