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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era
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To: porcupine --''''> who wrote (158)4/11/1998 7:32:00 PM
From: Berney   of 1722
 
Porcupine, A look at the DJIA ROE

Much discussion occurs as to whether the Market is overvalued.
Yes, by my count (at 3/31) 17 DJIA stocks were selling at a 5-
year high PE ratio. Guess what, 13 of them are not!

Let's look at it differently this month and consider the ratio
between the ROE and PE. Many would argue that the ROE is a better
method of valuing DJIA stocks because of the dominant position of
the companies in their industry, etc. (More to the point, none of
them sell at less than their projected growth rates so we have to
justify these valuations somehow!)

Wayne may be right in putting forth a very logical argument that the
current ROE's are not sustainable. I tend to agree. However, many
of the DJIA stocks have a substantial margin of safety between the
ROE and PE, and others do not. I hope you all enjoy this analysis.

03/31/98
SYMBOL ROE PE RATIO

MO 44.3 16.0 2.8
CAT 33.1 12.6 2.6
UK 26.9 10.5 2.6
GM 19.6 7.8 2.5
IBM 25.0 16.8 1.5
MMM 24.3 18.0 1.4
S 25.2 19.0 1.3
KO 56.7 46.4 1.2
ALD 24.4 20.8 1.2
DD 34.0 32.1 1.1
CHV 16.7 15.9 1.1
AXP 22.2 21.9 1.0
MRK 32.4 33.5 1.0
HWP 19.2 21.3 0.9
UTX 18.5 20.8 0.9
JNJ 26.6 30.5 0.9
XON 17.2 19.8 0.9
PG 27.5 32.3 0.9
AA 11.5 14.9 0.8
JPM 13.5 18.7 0.7
MCD 17.7 25.5 0.7
TRV 16.9 24.6 0.7
GE 23.4 35.0 0.7
WMT 17.8 32.6 0.5
DIS 11.4 37.2 0.3
GT 3.1 21.2 0.1
BA 10.0 NM NM
IP 3.2 NM NM
T 29.1 NM NM
EK 27.2 NM NM
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