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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Paul Shread who wrote (736)	8/28/2001 11:34:54 AM
From: Art Bechhoefer	Respond to of 36161

Paul, thanks for the link drawing parallels between earlier stock market slumps and the present one. One factor that worries me is NOT the relatively high price-earnings ratios for many stocks but the high PE's in relation to actual and estimated future earnings growth. Similarly, what long term investors may want to consider is the long term (at least two or three years) change in book value per share. If a stock shows an average annual increase in book value of, say 10 percent over the past couple of years, should it sell at a PE of, say 30? Should the stock price be eight or ten times book value, as is often the case nowadays? I would be worried about holding stocks with these valuations when the record of increasing book value per share (one of the best measures of shareholder wealth) is only very modest. In regard to oil stocks, I look for net changes in proven reserves in estimating the growth in estimated book value per share. This is one of many measures that might help an investor determine whether certain oil and gas producers are overpriced, or perhaps unnoticed bargains. Art