Mike: "My theory is, since I don't know how fast the recovery will be, to follow the earnings. I try to time to catch earnings upswings."
While I am in general agreement with your strategy, there are market forces now present that were absent during the previous cycle. If earnings are to drive the upswing, current research now available on the Internet will be fully utilized during sector rotation. New investors, traders and the Momentum crowd will look closely at ratings (how the companies stack up against each other in their respective niches), recent earnings performance and rely heavily on analysts' evaluations for projected earnings growth. The New Money lacking in your perspective, experience and knowledge will by necessity rely on the analysts.
Using UFAB, GIFI, and FGI as examples (I own all three; but, for different reasons). This is what the "New Money" will see:
UFAB Research: biz.yahoo.com
Vectorvest: vectorvest.com Buy Recommendation
GIFI Research: biz.yahoo.com
Vectorvest: Hold
FGI Research: biz.yahoo.com
Vectorvest: Buy
Oil Field Machine & Equipment Research: biz.yahoo.com
In this sub-sector, UFAB ranked #1 is forecast to make .36 this quarter, .40 next quarter (Jun/99) and $1.95 FY/00. GIFI is ranked # 7 and is forecast to earn .14 this quarter, .24 next quarter (Jun/99) and $1.10 FY/00. They are selling at roughly the same price and the 5 year earnings growth for UFAB is almost twice that of GIFI.
While I believe the UFAB forecast is probably overly optimistic and the GIFI and FGI forecasts to be overly pessimistic..that is nevertheless what new investors will see on Zacks, IBES, First Call, Thompsons, U Name it. Since the whole sector is priced at bargain basement levels, it seems logical the deciding factors on what to buy would ride significantly on FY/00 growth over FY/99 and projected earnings growth of the five year business cycle.
The three companies have little or no debt and all three have grown their companies during the worst depression in OS sector, ever. On percentage terms from historic bottoms to Fridays close, the three are already leading the pack, a trend I expect to continue.
K
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