<Off Topic: more general stock market stuff>
Brian,
Hi again. You wrote:
The point I was trying to make was that IMO AMAT's eps forecast of $1.69 was probably LOW whil KO's of $1.74 was probably high.
Sorry, I didn't pick that up from your post.
During the past couple of years, there has been a dramatic increase in momentum investing. A scary concept. One that puts the fundamentals in the back seat and plays the stock as if it were a game. With this type of behviour common in the market, how can anyone claim market efficiency???
It's true there has been a big increase in momentum investing, and I think this has increased volatility in the market this past year (though 1995 and 1996 were actually very low volatility years). The reason for the increase is because that style has produced results in the recent past. The nice thing about the way the market forces work, though, is that the more people that try to use such a strategy, the less payoff there will be relative to the market averages. This isn't a particular virtue of Wall Street, of course, just the way any big free market would work.
We have companies like Yahoo trading at 800X next years consensus, while some of the equips are trading at 10X this years eps, less than BV, etc etc. IMO, the market is more inefficient than ever and its inefficiency is displayed probably most in the DJIA.
Here I'd disagree. The departures from efficiency are much more likely to be found among the little stocks like your example YHOO, where people have widely varying expectations and very little information to base them on. But if you try to evaluate the degree of efficiency of the overall market, these little stocks don't have much effect because their capitalization is so small.
We have herds running into stocks and indexing, not investors analyzing the underlying fundamentals.
Well, we really have both. In fact, you will find people out there trying every conceivable thing that might make a buck. Makes it interesting all right! Best of luck.
==John |
