***OT*** (Beware: more boring argument about valuations, etc.)
Hello there, Chuzzlewit!
A number of topics.
1. If it's "boring" discussion you are looking for, you might check out the following SI thread (Graham & Doddsville: Value Investing in the New Era):
Message 3556451
The thread was founded by an investment advisor (alias "Porcupine"), in conjunction with three other pros. He has a very interesting website (link is provided), to which they all contribute model portfolios. Take a look at his Dow Model Portfolio, but especially at his "Methodology" section. A clue: he outlines a method of projecting future free cash flows, or, I should say, cash earnings. Like some others I have run across, he prefers the term "cash earnings" to describe the results obtained by the conventional method of computing "free cash flow," i.e., net income + depreciation + amortization + depletion, minus capital spending. Free cash flow, in his view, should take account of changes in working capital.
I scanned his projection method very cursorily, but as I recall, he does not figure in interest rates. You might want to argue with him about that(if my recollection is correct). (As for me, I would argue about what I see as his over-reliance on Value Line, but more about that anon.)
2. For a different (from yours) view of auto companies' debt, and at the usefulness of the price/sales ratios in valuing such companies, check out the piece on GM (Stock Analyst's Journal)on Morningstar.net website:
morningstar.net
If you can't get access, get back to me, and I'll copy the piece out for you. (Get back to me anyway, please -- I'm still toying with the idea of buying a piece of Ford.)
3. On Value Line. It's been around so long, everybody thinks it's God. It isn't. Its historical data are good, but it is slow to update (by comparison with the internet sources). Furthermore, all this fuddy-duddy stuff (S&P does it too) about "proprietary methods" is passe! In the era of Motley Fool, etc., you simply can't say any more: "Take our word for it. We know best." Phooey! (I've noticed many times, incidentally, that Value Line doesn't get onto the train until it is pulling into the station.) Whatever you think of Motley Fool's sample portfolios, their great virtue is that they explain, in exhaustive (and sometimes exhausting) detail, what their standards are, how they apply them, why they apply them, what companies meet them and why, etc., etc. And they stress (as you do) the necessity of doing one's own research. Furthermore, almost all internet financial sites take pains to explain their methodology/terminology, and will respond promptly and courteously when you ask them for further explanations.
It's a new age out there! (Get on the net, Value Line! And stop being so stuffy!)
4. Back to your point about the fact that most fund managers underperform the market. I'll lay you dollars to doughnuts that most individual investors do, too! At least, when fund managers are handling your money, the headaches are all theirs, and you are left free to devote your time to more soul-satisfying pursuits. (And if you are invested in US index funds or better yet, in European index funds, you may not even underperform the market!)
5. Finally -- shift gears, FULL ATTACK MODE.
Chuzzlewit, you are a fine financial analyst. You are even a good interviewee. But -- forgive me!-- you need to polish your skills as an interviewer! Sometimes you appear not to be paying attention to what your interviewee is saying, perhaps because you assume you know in advance what he/she will say.
A minor example (from your latest post to me):
I should have been more precise when I said search programs (you caught me!), but the point remains that much of the data in the data bases they scan are incorrect. For example, the TYC data you quoted are incorrect.
Let me refer you back to the post to which you were responding:
P.S. The info. I got about TYC and ASND did not come from a search program.
A more serious example (again, from your last post):
That's why I contend that it is very important to cross check data.
Again, from the post you were responding to (capitals for emphasis, this time round!):
..The only program I use is Telescan's ProSearch....The program is frequently afflicted with bugs of one kind or another, which screw up the data. But, as a congenital Doubting Thomas, I never put blind trust in anything, and so I RELY ON PROSEARCH ONLY TO GIVE ME A ROUGH (OFTEN VERY ROUGH) IDEA.....And, more to the point, search programs should be used not to analyze individual companies, but to compare individual companies to others...It can also be used to check out one's assumptions.....A good search program....can be a great time saver (AS LONG AS ONE DOES NOT USE IT AS ONE'S ONLY SOURCE, AND AS LONG AS ONE RETAINS PROPER SKEPTICISM ABOUT THE RESULTS).
Geez, how many times do I have to say it!
As for your reliance on pencil and paper, excuse me, Chuzzlewit, you are not, perchance....er...um....a fuddy-duddy?
<gg>
jbe |
