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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: Taikun who wrote (114)	7/30/2008 8:58:22 PM
From: elmatador	Respond to of 218884

any public company has to give returns that beat government bonds; otherwise, why bother with stocks? After a decade of stock-market drift, a huge number of big-name U.S. public companies fail to meet the test. There are 421 companies in the Standard & Poor's 500 that have been traded continuously for the past decade, according to Bloomberg. Nearly half of them (199) failed to gain 4 per cent a year over the past 10 years. (That doesn't count dividends, but since few S&P 500 firms pay large ones, it doesn't change the point.) Every sensible book of financial advice says that stock investing requires patience. But even Job would get impatient with a subpar investment after a whole decade. Forget the banks, which are a mess. The list of value-destroyers includes Pfizer, Home Depot, RadioShack, Goodyear, Sprint, Mattel, J.C. Penney, Gap and scores of other big names. This may be hard to believe, but Coca-Cola has been as terrible as Citigroup; with either company, you'd have lost 42 per cent of your capital since July '98 (again, not counting dividends). If you know a little about Coke, you'll realize that the number is deceiving. The company hasn't done badly, really. A decade ago, Coke earned about $1.40 (U.S.) a share. Last year it made $2.57, according to S&P/Capital IQ. It's all in the stock multiple: Coke was ridiculously priced back then and now is sensibly priced (about 16 times this year's earnings). Exactly the same thing happened to Anheuser-Busch. Profits went up steadily but the share price didn't. When it got cheap enough, InBev pounced. theglobeandmail.com