Technical Analysis and Charting
- DanG_6
- TONYBRIG
- DanG_6
- KirkL
- TONYBRIG
- Hugs
- TONYBRIG
- DanG_6
- DanG_6
- JenL_3
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» DanG_6 - High PEs and Stats
Tony, I agree that you should use what works for you. But since you are anxious for stats, before you go off and buy only high PE stocks, would suggest you look at some of the studies that have shown stocks perform almost in inverse proportion to their PE ratios. Check out Dreman's book for the details. But to sum up, in a study from 1948 to 1964, each year stocks were divided into quintiles, with the highest 20% PE ratio stocks in the 1st quintile, the next highest in the 2nd quintile, etc. Then performance of the stocks in each group was compared at the end of each year. The results showed average price increases for the groups as follows: 1st quintile (highest PEs), 7.7%; 2nd, 9.2%; 3rd, 12.0%; 4th, 12.8%; and finally the 5th quintile (lowest PE stocks), 18.4%. That was only one of many studies written about in the book that came to the same conclusion. That is, over the long haul, low PE stocks outperform high PE stocks on average. You wanted stats, you got stats. If you want to buck the odds, buy high PE stocks. If you want to go with the flow, buy low PE stocks.- Dan
-- posted by DanG_6
» TONYBRIG - Dont look at Em
How would I know I never look at them figures.P/E's that is. When I did I lost out on some
Biggies $.
This is not to say I wont consider other options.
Just think its a DUMB indicator.
What would I have done with BOWG if I had considered P/E.
Kirk?
BOLHH
-- posted by TONYBRIG
» Hugs - Buying a high P/E
Reminds me of buying after the analyst upgrades to a strong buy recommendation. I'd bet more than a few stocks make a great short a day or two after these "upgrades." (Especially if the stocks were languishing before the call.) How many times have you seen that one on the charts?Aren't most forms of TA simply trying to identify and project the most common buyer/seller behavioral patterns? (stange ways to look for fear and greed, aren't they?)
Hu
-- posted by Hugs
» TONYBRIG - William J Oneill says:
His theory is that P/E's arent important inevaluating a stock. In his "How to make money
in stocks" He shows a history going back 33 yrs
which proves his point.
I cant legally reporoduce this here so if your
interested see a copy of his book and this/other
subjects.
As far as buying after Analysts upgrade I like
that specially if its a stock I'm in. Also it
depends on who is doing the up-grading and more
impt my feeling for the stock.
The point still remains to me:
Buying a stock based on low P/E only is very
NARROW-MINDED. Many more important factors then
that.
Look at MSFT for example high P/E!
Look at BOWG for example no p/e
More to follow on this later I'm sure.
BOLHH
-- posted by TONYBRIG
» DanG_6 - Anecdotes vs Facts
Tony, although you demand statistics and facts, once they are presented to you, you dismiss them as being "NARROWMINDED". You seem to be more in tune with anecdotes such as "Hey, my grandfather smoked 3 packs a day and lived to be a hundred, so that's what I'm going to do." You are looking for shooting stars. Experienced investors look to grind out above average gains year in and year out. Novices look to make that one big quick killing. But that's ok, maybe you will be the "one in a million" that bets on the long shot and wins. I sincerely hope so.- Dan
-- posted by DanG_6
» DanG_6 - Hugs is Right!
Man, you struck a nerve! I've seen so many analysts recommend a stock as it streaks into the stratosphere, then wait until it drops to 50% of its value and put it in the "hold" list (analysts that work for brokerage houses seldom have many outright "sell" candidates--bad PR). You could find ways to go broke faster than following these "analysts", but you'd have to dig pretty deep to do so. I never thought of "fading" their recommendations and maybe going short after a "buy" signal, but that idea just might actually have some merit.- Dan
-- posted by DanG_6
» JenL_3 - More on P/E ratios
Just to add to the discussion on P/E ratios, today's local paper had an AP article by Vivian Martino, Predicting the market? Stick to the basics. The article quotes A.C. Moore, chief investment strategist for Dunvegan Assoc. in Santa Barbara, CA, who seems to be a "value and fundamentals" investor". At the end of the article they discuss P/E ratio of a stock:"A high ratio indicates investors are expecting strong future earnings, while a low ratio usually means less optimism." (Which is where, I think, Tony is coming from.)
(But the next paragraph.....)
"Moore says many stocks these days have a higher than normal P/E ratio, which he believes shows the stock is overpriced and has room to fall. (Which is where, I think, everyone else on this thread is coming from.)
...Jen
-- posted by JenL_3
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