Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: porcupine --''''> who wrote (47)	3/7/1998 5:15:00 PM
From: porcupine --''''>	Read Replies (1) of 1722

<< In order to compare them to bonds you must reinvest most of the bond interest and compare earnings/cash earnings to the new bond income stream..... >> I try. See: web.idirect.com In particular, the portion under: "Crunching The Numbers ".....the 4 year aggregate cash earnings yield is computed (total 4 year cash earnings divided by the current price). This provides a forecast for the coming 4 years of how much cash a company will generate per dollar of share price. The higher this ratio (cash earnings yield), the better." Actually, it is taken a step further: This 4 year cash earnings yield is annualized, i.e., I calculate the interest a bond with a purchase price the same of that as the stock would have to pay to generate the same amount of cash if the interest on the bonds were reinvested annually at the same interest rate. I then compare this amount with the approximate return on a Treasury Bond with 4 years of remaining maturity. Based on this week's Market Laboratory in Barron's (p. MW100), this appears to be a shade under 5.6% -- not too different from that of the Dow. But, of course, the T Bond yields are guaranteed -- the 4 year earnings growth of the Dow is not. Reynolds Russell web.idirect.com "There are no sure and easy paths to riches in Wall Street or anywhere else." (Benjamin Graham)

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