but this would not be expected of PSRs, for example, if stocks are a "bargain". if the "E" in PE approaches zero, it is likely that the PE will be high. however, that must be compared against other valuation measures. in the early 1930s, PEs were high but PSRs were exceedingly low and the market still paid substantial dividends.
Do you think that PSR alone is a valuable metric to compare a category leader which is still in control of the desktop OS TALC (MSFT) in 2001 to a company in the 1930's? If so, could you give an example of a company and their PSR in the 1930's that would be a company worth comparing to Microsoft in 2001 in terms of market dominance, no debt and their product breadth? As you mentioned, dividends are quite different at this current time as well as a number of other things when compared to the 1930's. You have mentioned Micron several times in the past couple of days and the PSR now as compared to previous trough times. Unfortunately, Micron is not the type of company we would consider to have 'value' using gaming criteria. At least not the type of 'value' for a longer term play in a portfolio in their commodity business.
this is similar to the Nifty Fifty argument--find a company that will "survive" due to its strong market position. sure, survival is nice, even necessary. but it is not also sufficient to ensure good returns.
If a category leader survives the contraction portion of the economic cycle while some of the smaller fodder of competitors go belly up, the category leader is in a nice position coming out of the contraction and failure period to move on into the future. Maybe it's just a theory, but we shall see what it does for some of the category leaders. One has to like the prospects of some of the world's largest technology companies that have zero or very small debt going forward. I agree that plenty of overcapacity remains in a variety of segments, but a company that cannot survive due to their financial position will be weeded out and those that do survive will benefit.
as long as you didn't mind severely underperforming small value and commodities, throughout the rest of the 70s, and underperforming equity markets as a whole (as well as bond markets) for more than two decades. this length of time starts to approach the realistic investment time horizon for many investors. not to say one shouldn't hold such stocks, but holding them alone can be quite risky as i have mentioned before.
Hence our agreement on a diverse asset class during diverse times. Real estate in certain areas was a glorious investment in the 70's as the oil boom hit areas of America.
i don't really want the job of defending them--i'd rather just discuss the issues, but i will mention that one of their funds is up some 29% this year compared to double-digit losses for most equity indexes, and 32% loss for the NDX100.
No need to defend them. I haven't studied their long term track record, so don't know how they compare to other money managers. My question remains if they have ever seen 'value' in some of the more important technology companies over the past decade.
as i mentioned to uf, valuation tools are not market timing tools. also, before i forget, that article is just a daily blurb they put up. there's a new one each market day after the close. their philosophy is described in much greater deal on their website under the article "LIMBO LIMBO, HOW LOW CAN IT GO?" located on the right side of the home page, although this URL might take you there directly: comstockfunds.com;
Yes, I read the Limbo article last time you made reference to it. I am curious about your statement that valuation tools are not market timing tools. If one was not a fan of Microsoft since 1986, Intel since 1971, Cisco since 1990 (or any other technology stock during their history) - what basis would allow you to sell the stock if it was not based on the valuation creating a risk/reward scenario not in your favor. Is that not a market timing issue using a valuation tool? On the other hand, if the valuation of a Microsoft, an Intel, a Cisco (or any other technology stock during their history) reaches a low enough valuation that creates a risk/reward scenario in your favor and the decision is made to invest in shares - is that not also a market timing issue using a valuation tool?
Mucho - at some point in time - an investor has to make a decision on what and when to buy as well as what and when to sell. It may very well be that in this economic trough, valuations do not reach levels that are low and attractive enough to spur on a broad bull market. Or at least for the large caps. They may just stagnate for quite a lengthy period and up and coming companies that provide products and services in emerging segments may become the leaders of any bull action. Or there could be a scenario of swing trading moves from one segment to another. All are possible scenarios which could take place in many types of asset classes.
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