Best Investment Opportunity in Over 25 Years
By Charles Rother, CFA
Chief Investment Strategist, Sector Logic, LP
....Since many of Value Line’s 1700 companies are small
capitalized companies, we used the Ibbotson Small Cap Stock
Index in our analysis. As Table 1 shows, historically, when
Value Line estimated median price appreciation potential
exceeded 150%, small cap stocks produced returns of 178%, on
average, in the following 4 years. This equates to an average
annual return of 29%. In contrast, small cap stocks generated
significantly smaller returns when Value Line estimated
median price appreciation potential was less than 50%.
(note: present VLAP was 140% last week)
......As Table 2 demonstrates, over shorter and longer time
frames, small cap stocks produced excellent returns
historically when Value Line had an estimated median
price appreciation potential greater than 150%, as it is
presently.
(note: present VLAP was 140% last week)
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So, it would appear we've hooked onto a good wagon when using
the VLAP as the basis of our v-Wave. Proper scaling still needs
to be done, however. That will come when we have a deeper
database on which to base analysis.
Note that a
50% VLAP equates to a 78.6% v-Wave
75% VLAP equates to a 67.9% v-Wave
100% VLAP equates to a 57.3% v-Wave
125% VLAP equates to a 46.6% v-Wave
150% VLAP equates to a 35.9% v-Wave
The v-Wave is a suggested cash reserve level for individual
stocks. For diversified mutual funds one would divide the
current v-Wave value by 1.5.
Thanks to JD and also Sector Logic, LP and American Strategic Capital, Inc.
for the information.
Best regards, Tom |
