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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (15854)	11/22/2002 1:39:53 PM
From: Paul Senior	Read Replies (2) \| Respond to of 78481

NWPX: Not sure who the other buyer here was (Grommit?) couple years ago when it was discussed, but I kept a little, and I'm adding to it today. No news out; stock just has drifted low enough to attract me. yahoo.marketguide.com

To: Paul Senior who wrote (15854)	11/22/2002 8:08:27 PM
From: Jurgis Bekepuris	Respond to of 78481

Paul, RTRSY. The problem with Reuters is the same problem that I have with other stocks. The $64M question is what is the forward going ROE that we can assume. For example, take RTRSY. If we assume that they can return to 30% ROE, the stock is an immediate and great buy with expected annual returns in the 28% range. If we assume 20% ROE, which is below their ROE in EVERY ONE of the last 10 years, it is still a buy with expected annual return in 15% range. If we assume only 15% ROE, then it's not a buy with an expected annual return in 8% range. (RTRSY's 2001 ROE is 4% and 2002 will not be better either). It's the same problem I have with INTC, MSFT, BMY, MRK, SGP and any other high ROE stocks of last decade. If we assume forward ROEs in 20-25-30% range, they are undervalued. If we reduce expected ROEs to ~15% or below - which is still a high bar for most companies - the stocks are fairly valued or overvalued. Any comments from anyone on this? How is it possible to estimate future ROE if it is unclear whether the last decade was an aberration or if the last two years were extremely bad? Re: rapid runup. Yep, I am seeing the same too and I am reluctant to pay up, since we could get a third dip if some more scandals, pension liabilities, no pick up in H1/2003 materialize... Jurgis - still mostly invested in SP500 + value mutuals + some stocks