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Strategies & Market Trends : Roger's 1998 Short Picks
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To: Pancho Villa who wrote (7288)4/18/1998 9:03:00 PM
From: Market Tracker  Read Replies (1) of 18691
 
<<Quality of earnings continue to deteriorate>>

This will soon become a hot topic of discussion among fund managers, and many on Wall Street. As merger mania continues, and more and more poolings of interest are done, the true quality of a company's earnings, becomes cloudier by the day. The EPS may be going up, but the quality of those earnings goes down. I have used the effective tax rate of a company as a proxy of QOE for many years while doing DD. The higher the effective tax rate, the higher the QOE generally. The stock market (usually) recognizes and rewards the higher QOE company with an expanded earnings multiple, but in times of a mania, the reverse appears to be true. The part that never changes is... someone ALWAYS buys at the top.

MT
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