Stephen...yeah, I like to test out trading strategies...and for me it works well to be short some stocks right now while holding longs that I like ... as u know, I like to use valuation tools as a guidepost and stocks do trade to excess...regarding box makers, I am a believer that box makers provide little value-added in a commodity business... the same exists for certain component mfgs where competition is tough..regarding KO, I can buy it back...but I have to be short some stock in the Dow...I cant pick tops...but one week, it looks great another looks horrible...sentiment changes rapidly...all we need is an excuse for the mkt to run and take profit...I like my risk reward when I am short some stocks now than when Dow was at 8500...so I give up some upside on my longs and to make more on the downside rather than to give up profits on my longs...I do not take shorts for outright view...cheers
ps pls read below
Subject:
U.S. corporate earnings growth may hit six-year low
Date:
Thu, 19 Mar 1998 15:42:21 -0800 (PST)
From:
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To:
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News Alert from Reuters via Quote.com
Topic: (NASDAQ:INTC) Intel Corp, (NYSE:MOT) Motorola Inc, (NASDAQ:ACCOB) Coors
Adolph Co, (NYSE:PLA) Playboy Enterprises Cl B,
Quote.com News Item #5822604
Headline: U.S. corporate earnings growth may hit six-year low
======================================================================
By John Hanley
NEW YORK, March 19 (Reuters) - Corporate earnings growth is
expected to slow to a six-year low in the first quarter, but
investors are betting a jump in profits later this year will
make up for the impact from Asia's financial crisis.
The nation's biggest companies are expected to report
average earnings increases of 1.7 percent from a year earlier,
down sharply from the 10.4 percent growth analysts were
forecasting at the start of 1998, according to First Call and
I/B/E/S, two companies that track profit forecasts on Wall
Street.
That would be the slowest since the fourth quarter of 1991,
when profits were flat for the companies in the Standard &
Poor's 500 index. Weak results at technology companies, hurt by
Asia's woes, and energy producers, hit by slumping oil prices,
are partly to blame.
Yet there are pockets of sunshine, including expected
strong growth from some smaller stocks and steady increases
from financial services and industrial companies.
And despite early warnings from bellwether tech stocks such
as Intel Corp. and Motorola Inc., analysts are still predicting
robust annual earnings growth of about 10 percent this year for
the companies in the S&P 500, First Call and I/B/E/S said.
"The markets are looking beyond the first quarter. The
fourth quarter 1998 and 1999 are probably what really matter,"
said Hugh Johnson, chief investment officer at First Albany.
He noted several stocks have been hit by profit warnings,
only to recover as investors shrugged off near-term concerns
about earnings growth and what some see as high stock prices.
"If you had been shaken from your bullishness because of
that concern, your performance would have been poor," he said.
"I learned a long time ago if you hang your hat on the issue of
valuation, you're going to be left at the starting gate."
But some market watchers are worried that if stronger
earnings do not develop later this year, that might not justify
the stock market's recent march to record highs.
"Earnings growth is not going to be what people think and
so far, people have absorbed lower earnings because they think
it's a short-term thing," said Tony Spare, chief investment
officer of San Francisco-based Spare, Kaplan, Bischel &
Associates, which manages more than $2.5 billion in funds.
"I think it will be a yearlong phenomenon," he said.
Corporate earnings grew 10.8 percent in 1997 and 8.7
percent in the fourth quarter, according to First Call, and
have beaten a long-term 7 percent trend in 23 of the last 24
quarters.
"I think it's a huge warning," Chuck Hill, director of
Boston-based First Call, said of this quarter's predictions.
"If this is a one quarter aberration and Asia is behind us
after that, then the market can absorb it," he said. "The
danger is that this will be longer and deeper than people are
currently thinking, and that's the risk factor."
Peter Crays, manager of research at New York-based I/B/E/S,
said it was worrisome that analysts have not lowered earnings
forecasts for the rest of the year. He predicted forecasts will
eventually be whittled down to around 6 percent to 8 percent.
"I think it sticks out as a flag. ... Analysts are only
lowering expectations for first quarter and leaving the last
few quarters somewhat high, trying to say it is a short-term
effect," Crays said.
The problems in Asia have hurt American exports to the
region, with tech companies hit hard by the slumping demand.
On the other hand, smaller companies are posting stronger
growth. The Russell 2000 index of small stocks is expected to
post earnings growth of 12.5 percent for the first quarter, and
25.6 percent for the year, according to First Call.
Stocks in the Russell 2000, which include brewer Adolph
Coors Co. and Playboy Enterprises Inc., generally have a market
worth of under $1 billion.
(NASDAQ:INTC) (NYSE:MOT) (NASDAQ:ACCOB) (NYSE:PLA)
Copyright 1998, Reuters News Service |
