FYI...
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investorsalley.com
Are we in a disguised bear market?
By Timothy Vick, Contributor
Tuesday, February 15, 2000 8:32 PM ET
Now that we have can judge the 1998-99 stock market in retrospect, it?s obvious that
something has been rotting underneath the surface of the S&P 500 or Nasdaq.
Consider these sobering facts:
1. The median return of S&P 500 stocks so far this year is minus 8.8 percent. That is,
250 of the 500 stocks have fallen more than 8.8 percent; 250 have performed better.
The median return of all U.S. listed stocks so far this year is about 1.8
percent?considerably better than S&P 500 stocks. This indicates that while many
large-cap cyclicals may be falling out of favor, some money has been flowing to smaller
company stocks.
2. The median return of all U.S. stocks in 1999 was minus 5.8 percent. The median
return for all Nasdaq-listed stocks was zero. These figures really bring home the point
that last year?s market was totally dominated by a handful of large-cap leaders, such as
Cisco Systems, Oracle, Intel, General Electric and others. By my calculations, the
average Nasdaq stock sits about 30 percent off its 52-week high, which in
more--normal periods of history constituted a true bear market.
3. The median return of all U.S. listed stock in 1998 was minus 14 percent. More than
68 percent of all stocks lost money in 1998, meaning you had about a 32 percent
chance of picking a winner that year.
What these figures show is that the bulk of the U.S. stock market has been in a
legitimate bear market for about two years now, a fact obscured by the almost daily
upwards movements of Nasdaq and technology stocks.
Shift your attention away from the Qualcomms, Ciscos, and Oracles of the world and
you will find some real wreckage. Some of Wall Street most favorite stocks just a few
years ago have plummeted in price. Some now trade where they did during the
1990-91 recession.
Toymaker Mattel has fallen from $46 in 1998 to a current price of about $10. At its
peak, brokerages enthusiastically touted Mattel at 30 times its earnings. Today, no
institution wants to touch it at one-quarter its peak price.
Remember Service Corp. International, the ultimate roll-up company that offered
perpetual growth by acquiring funeral homes and cemeteries through out North America
and Europe? Since mid-1998, the stock has fallen from $46 to about $4. At its peak, it
traded for more than 30 times its earnings, so confident were analysts about Service
Corp.?s growth prospects. It was one of the best-performing stocks of the 1990s until
the industry became racked with a rise in cremations and rising acquisition costs. Today,
the company is being given away in the market.
J.C. Penney recently plummeted to $17, its lowest price since the recession. That?s
down from $75 in 1998. What?s wrong here? Can a 100-year-old company
experience a 77 percent decline in intrinsic value in that short time period? Either,
Penney was foolishly bid up to unsustainable highs (which it was) or has sold off to
unsustainable lows (which is possible). Sears Roebuck, in falling back to $29 recently,
now trades where it did in 1973. Imagine that?not a dollar of gains in 27 years.
I could go on and on describing once-favorite stocks that have either treaded water for
two to three years or have fallen to multi-year lows in what should be the best of
economic times.
Boston Scientific, Coca-Cola, Gillette, Hershey, Nucor, NIKE, Wendy?s International,
PepsiCo, Berkshire Hathaway, Walt Disney, Banc One, Wells Fargo Bank, Hasbro,
H&R Block, Compaq Computer, 3Com, Diebold, Delta Airlines, Caterpillar, Dun &
Bradstreet, Texaco, Boeing, and Eastman Kodak are some of the many blue-chip
names that have provided investors no gains for 2-4 years now.
Each had been bid to such tremendous levels between 1995 and 1998 period that they
were destined to provide inferior returns going forward.
But their poor returns pale against those of former wunderstocks that have wiped tens
of billions of dollars of net worth from investors. Philip Morris, HEALTHSOUTH, US
Air, Sears, Penney, PeopleSoft, Silicon Graphics, Dole Food, Crown Cork & Seal,
Service Corp., Pep Boys, Fleetwood Enterprises, Cracker Barrel, Humana, Hilton
Hotels, and most mining stocks have seen their stock prices plummet to recession lows
or below.
Does this sound like a healthy market to you? This roster of underperformers should
awake you to what has really been occurring on Wall Street?a stealth bear market. |
