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

To: Spekulatius who wrote (19802)	10/21/2004 2:11:55 AM
From: Spekulatius	Read Replies (1) \| Respond to of 78625

Not so great (IMO) article about "moat's" from Morningstar: Morningstar.com Two Stocks Even a Bear Can Love Wednesday October 20, 7:00 am ET By Curt Morrison, MD, FACC I'm a bear. As I argued in a previous Stock Strategist column, I think the major, market-cap-weighted stock indexes are preposterously overvalued. Given that opinion, you might think that I refuse to own any stocks, but you'd be wrong. In fact, the broad market was even more overvalued in the spring of 2000, but bargains were everywhere then. At that time I purchased a small-cap retailer, three real estate investment trusts, and three thrifts--all selling at absurdly low prices. Those stocks appreciated substantially over the next several years despite the decline in the major indexes. The key thesis is that growth has been good in the past so it must be so in the future. Even a very casual look at MRK (and to a lesser degree KO) will show that the past in unlikely to repeat itself.... During the last 10 years, Merck's compound annual growth in normalized free cash flow was about 11.6%, and its dividend growth was about 11.7%. Coke grew free cash flow at about 7.5%, and its dividend at 8.9%. Because inflation during this period was about 2.5% to 3%, that amount can be subtracted from these figures to approximate real growth. Both of these metrics should parallel real earnings per share (EPS) growth over the long term, but the broad market's real EPS growth from 1871 through 2001 was only 1.25% (according to Jeremy Siegel in Stocks for the Long Run). If Merck and Coke do roughly as well in the next two decades as in the last one, that would constitute outstanding long-term growth. biz.yahoo.com