In a effort to give equal time i am posting a BUY BUY now article that you KNOW i would systematically scornfully tear apart and expose the hucksters to talk this babble.
But here it is, my equal-time post for the week(gag-me)
quote.bloomberg.com
<<07/06 11:12
Some Say Share Values Now Beat Prior Lows: U.S. Stocks Outlook
By Robert Dieterich
New York, July 6 (Bloomberg) -- The Standard & Poor's 500 Index is cheaper than it was after the Sept. 11 terrorist attacks and the plunge following the 1998 failure of the hedge fund Long- Term Capital Management, based on forecasts for earnings growth.
The U.S. stock benchmark sells for about 19 times its companies' expected profits the next 12 months. While analysts forecast earnings to rise in the second half, the index has dropped 14 percent this year amid mounting investor skepticism of companies' accounting practices and management.
``Strip the psychology out and the market's undervalued,'' said Brian Bruce, who oversees $13 billion as director of global investments at PanAgora Asset Management. ``The market should be going up based on valuation and the likelihood of earnings improvement from here,'' Bruce said. ``What's been driving it down is the accounting scandals.''
His Boston-based firm aims to have about 65 percent of assets in stocks, compared with its typical 60 percent. Stocks he has bought recently include Ambac Financial Group Inc., the second- biggest bond insurer, and Cinergy Corp., an operator of electric utilities.
In a 3 1/2 day trading week, shortened by the Independence Day holiday, indexes rebounded after tumbling Monday and Tuesday. The Dow Jones Industrial Average gained 1.5 percent, snapping a six-week losing streak. The S&P 500, which on Tuesday reached its lowest close since January 1998, recovered to drop 0.1 percent. It slid 4.2 percent the first two days of the week. The Nasdaq Composite Index shed 1 percent.
Rising Earnings
Profits for S&P 500 companies as a group are expected to begin growing again in the third quarter after six quarters of declines, according to analyst estimates tracked by Thomson First Call. For the entire year, analysts are projecting profits will expand 6.9 percent, though that figure has fallen from 9.3 percent three months ago as analysts pare forecasts for individual companies.
With the expected profit gains, the ratio of the S&P 500's price to forecast earnings is lower than after the Sept. 11 terrorist attacks, when it fell to about 22. The sell-off caused by the collapse of the Long Term Capital sliced its price-to- forward-earnings ratio as low as 20 at the end of August 1998.
Both these lows were followed by rallies: The S&P 500 added 10 percent in the fourth quarter of last year, and 20 percent in the fourth quarter of 1998.
Factor in the lowest benchmark interest rates in 40 years, and price-earnings ratios are ``about as extreme as it gets,'' said Edward Yardeni, chief investment strategist at Prudential Securities Inc.
Excluding Technology
Among the S&P 500's 100 biggest U.S. companies, 51 have estimated price-earnings ratios below the index, according to Bloomberg data. The biggest are: General Electric Co., Citigroup Inc., American International Group Inc., International Business Machines Corp. and Merck & Co.
Stocks' valuations are most compelling if technology companies, the most expensive among the 10 industry groups in the S&P 500, are excluded, according to Gary Tapp, chief quantitative analyst at SunTrust Robinson Humphrey in Atlanta.
``On that basis, we're down to 16 times forward earnings, which is back well below where we were coming out of the last recession in 1991,'' he said in an interview.
Yardeni assesses the attractiveness of stocks based on price, earnings and interest rates. With the yield on the 10-year Treasury note as low as 4.75 percent recently, the S&P 500 would be fairly valued at 21 times expected profits, he said. Lower interest rates make a company's profits worth more to investors.
Credible Forecasts?
Some investors say stocks aren't as cheap as they appear because analysts' earnings forecasts aren't credible.
``Can you believe any of these forecasts?'' says Wendell Perkins, who helps manage $750 million at Johnson Asset Management in Racine, Wisconsin.
He is buying some stocks that have been swept lower in the market's declines this year, including Avici Systems Inc., which has lost two-thirds of its value this year, and 3Com Corp., off 25 percent. Both are makers of computer-networking equipment.
France's Vivendi Universal SA, the second-largest media company, dropped to a 15-year low this week, as the board ousted Chief Executive Officer Jean-Marie Messier. Under his leadership, the company saw its losses mount and its stock plunged 22 percent this week. Moody's Investors Service cut its debt ratings to junk on Monday.
Third Year
The turmoil at Vivendi caused AOL Time Warner Inc. to plunge, as investors grew concerned the U.S. company's accounting might hide weaker-than-expected finances. AOL shares rebounded, though, ending with a 0.7 percent loss for the week. They've fallen 55 percent this year.
Signs this week of an improving economy included a government report that factory orders rose in May for a third straight month. An industry report showed that services, which are the biggest part of the economy, grew in June for a fifth month.
Next week, Alcoa Inc. will become the first company in the Dow average to report second-quarter results. Analysts expect the biggest maker of aluminum to report earnings fell 41 percent to 28 cents a share, according to Thomson First Call.
Investors also will get data on wholesale prices, along with the latest read on the health of the consumer in the form of retail sales data and the University of Michigan's consumer sentiment survey. Both are likely to rise, according to Bloomberg News surveys.>> |
