Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Value Line Investment Survey -- Ignore unavailable to you. Want to Upgrade?

To: EL KABONG!!! who wrote (143)	8/2/2006 10:43:11 PM
From: OldAIMGuy	Respond to of 219

Hi EK, Re: Looking Forward............... My own indicators that are derived from Value Line data are showing a "split decision." First is Relative Valuation - a combination of current short term interest rates and Value Line's P/E: Here we see that interest rates have overwhelmed the P/E drop keeping the indicator in BEARISH territory. This has been a very reliable indicator since starting the data collection in 1982. Earnings need to get better or prices need to drop to get the P/E down. We can't expect interest rates to drop, so the pressure's on the P/E side. I think this really shows where there's a ceiling on the the market's potential more than it does any certain threat. Lack of upside potential can be hard on investors in a different way from downside risk. Now, here's the other component based on Value Line data. This one is derived from their 41 Best and Worst Performers lists (last 13 weeks, Page 33 of the Index section): Here we see a bit more optimistic view of the market. Again, since 1982 this indicator has been able to call near term market bottoms pretty well. There's very little speculation around in much of the large cap sector. Even the expanded edition shows lower speculation than in a long time. If you would like to read a bit more about these ideas, there's the weekly freebie newsletter at aim-users.com and further historical info at: aim-users.com There's a bunch of tech stocks in the Worst Performers list that shows it to be somewhat over-sold. I'd think that would be some happy hunting grounds for those interested in bargain shopping. Best regards, Tom

To: EL KABONG!!! who wrote (143)	8/9/2006 10:13:45 PM
From: SI Dave	Read Replies (2) \| Respond to of 219

I used Value Line for over a decade as my primary stock screener. If they are 80% invested in common stocks in the model, they are seeing very attractive value in the market. It doesn't happen to that degree very often.

To: EL KABONG!!! who wrote (143)	8/14/2006 8:00:05 PM
From: EL KABONG!!!	Read Replies (1) \| Respond to of 219

Some rather sage thoughts from Value Line on investing in ETFs... valueline.com The Value Line Mutual Fund Survey --------------------------------- Published May 16, 2006 --------------------------------- ETFs: The Good, The Bad Exchange traded funds (ETFs) are all the rage. You can't read a finance magazine without hearing about these products and how they are just perfect for all of your portfolio needs. While there is a grain of truth in that statement, there is also the seed of a disaster waiting to happen. ETFs are ingenious products that have some great advantages over mutual funds, both the open-end and closed-end varieties. Basically, the benefits boil down to this: You can trade an ETF like a stock at its net asset value all day long without paying huge asset management fees. Moreover, you can short ETFs and there are even options based on some of them. There are, however, some broad negatives with regard to ETFs. For example, generally speaking, you must pay a commission when you buy and sell ETFs. This makes accumulating money over time very expensive, despite the low cost of ownership. Mutual funds are a much better option in this regard. Second, to allow for all-day trading, ETFs must meet strict disclosure requirements. As such, the current ETFs are all index-based and not actively managed. Where you stand on this issue is really a matter of taste, but the end result is that there is a limitation as to what can be done within an ETF's portfolio as compared with an actively managed fund. The indexing issue is my biggest concern as it relates to average investors. The first batch of exchange traded funds was designed to track long-standing indexes, such as the S&P 500 Index and the Dow Jones Industrials Average. That made complete sense, as these indexes were widely followed and their constituents were well known. For someone looking to track a broad index, or a sub index, these ETFs were and are still viable options. The second wave of ETFs, however, has often been derived from obscure indexes or, worse, an index created for the sole purpose of later creating an ETF. ETFs have attracted a huge amount of money over the last few years. For institutions and those will large sums of money to invest, these products can be a cheap and useful tool. In fact, there is an ETF that would be appropriate for most of the asset classes in Value Line's Model Portfolios (see table). I've also reviewed some modern ETFs that have been created based on sound principles, such as the Dividend-Achievers based ETFs. There is definitely value in some of these products. Still, I have concerns about the popularity as the hot new investment idea because hot investment ideas generally lead to excesses and abuses. For example, there is an ETF in the works that is going to track initial public offerings (IPOs). It should be pretty interesting to see how that fund does, as it is often hard to get access to IPOs and harder still to get access to good companies going public. The risks here far outweigh the potential rewards, as far as I'm concerned. The point I'm trying to make is that you need to consider ETFs very carefully. Just because they are the investment idea of the day, doesn't mean they are appropriate for you or that they fit well into your portfolio. If you are looking into buying an ETF, make sure that you understand what it does and why. Moreover, make sure that the investment concept makes sense to you. And try to avoid gimmicks, such as the IPO ETF. Once an ETF passes this "sniff " test, the next question is whether or not it fits into your overall portfolio. Indeed, it would be a bad call to force an ETF into your allocation design if it doesn't fall naturally into place (using an IPO ETF to fill the small cap component of your asset allocation model, for example). Overall, I am favorably disposed to ETFs. However, they can hold pitfalls if you don't understand what they are and why you own them. I brought this topic up now because we are preparing our special edition dedicated to exchange traded funds (it comes out after issue 8). As I've looked over the landscape in preparation, I definitely think there are signs of froth in the ETF market. So don't just jump into this fad—think it through. Reuben Gregg Brewer Editor EK!!!