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     007
Member
Username: 007
Post Number: 383
Registered: 05-2005Rating: N/A
Votes: 0
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| | Thursday, January 25, 2007 - 09:07 pm: |  
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Hi Colin,
I know you and Robin are up to your necks in requests so I don’t expect my suggestion to receive any privilege but I think it’d be really cool if, sometime in the future, we could see IC make available in the top left-hand corner of the charts a little box (translucent?) that provides some basic FA formulas like earnings, yield, p/e multiples, etc. This would help a lot when comparing against competitors as well as sector and market averages.
Again, its only a suggestion.
Thanks.
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hilarius
Member
Username: hilarius
Post Number: 2051
Registered: 04-2004
Rating: N/A
Votes: 0
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| | Thursday, January 25, 2007 - 10:00 pm: |
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007
I am a great believer in FATA
FA + TA
However some writers hold the view that current earnings yield, while helpful, has far more limited value than PROSPECTIVE earnings yield
The first provider to offer regularly updated CONSENSUS future earnings per share 3 years ahead (already available at some premium research sites) in SEARCHABLE FORM will be offering a truly valuable service
I believe that FUTURE EARNINGS YIELD to current price is in fact the HOLY GRAIL
Recently I spent several weeks transferring future EPS forecasts manually to a spreadsheet in order to rank FUTURE EARNINGS YIELDS. It was a labour of love, there being apparently no downloadable consensus future earnings, but only manual methods of access
The winner was ABY which I hold, but the research could already be out of date (due to earnings upgrades and downgrades) and another lower down my list, MFS (held), has also proved to be a winner so far, as is TPI (held and then sold)
If only I had a team of dedicated helpers to keep my list up to date I would have continuously ranked future earnings yields reflecting latest consensus opinion (never guaranteed correct, but still an interesting guide when results are ranked)
Unfortunately Dug doesn't like me to have private helpers
I admit the pay is lousy (nil) but the rewards are in the results provided this market is not overheated to boiling point by the private equity funds, and continues to prosper
Some say earnings per share are at historic highs themselves and can't grow
That word "can't" is always a challenge 
Hilarius
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities
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hilarius
Member
Username: hilarius
Post Number: 2052
Registered: 04-2004
Rating: N/A
Votes: 0
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| | Thursday, January 25, 2007 - 10:07 pm: |
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PS My rankings and stocks mentioned above could be totally wrong due to data copy and paste errors, formula errors, or my own mistaken opinion of the value of future earnings yield
This is why research data needs to be checked, rechecked and checked again, and then tested against individual stock price gains and losses compared to other selection methods
At this stage I have too much on my plate to keep my future EY list continuously updated and checked
Hilarius
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities
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007
Member
Username: 007
Post Number: 384
Registered: 05-2005Rating: N/A
Votes: 0
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| | Friday, January 26, 2007 - 03:59 pm: |
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Hilarius, too true! The task of maintaining a spreadsheet of, for example, even the ASX50 – even though substantial data is already widely available, as is always the case, because companies with larger market cap receive better coverage from data providers than the other smaller players – is too tiresome. Not to mention such companies are watched by too many experts making it almost impossible to use such information to any real advantage.
It would be great if such information was as readily available for the smaller cap players. It would be even better if the information was made available on IC and I didn’t need to log onto the broker sites all the time.
Regarding a preference between past actuals and future prospectives most would agree that prospective figures are more useful than actual past results subject to the availability and dependability of such pro forma data.
Finally, in relation to what others are saying (are these analysts?) about EPS being at historic high levels with no more room to grow, you possess a major advantage over the rest of us, you’ve been around longer than most and have much experience with Australia’s GDP and interest rate cycles so I known you’re quite capable of anticipating what the economy is going to do. Of course, you’ll agree that in the event future interest rate rises succeed in slowing the economy, and consumer spending with it, then these guys are possibly correct and earnings-reliant cyclicals will suffer as a result of both poor consumer spending and investors realising that current premiums being paid for future growth and yield are too high.
Happy Australia Day!
(Although not an Australian citizen I’m proud to be an Australian resident for taxation purposes.  )
P.S Nil pay? How many zeros at the end of that?
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captain_chaza
Member
Username: captain_chaza
Post Number: 2361
Registered: 02-2003Rating: 
Votes: 1
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| | Monday, January 29, 2007 - 04:04 pm: |
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Ahoy Dear Friar
Let's discriminate between "technical" and "fundamental" data.
Technical data is data which is generated by the action of the market.
It is "HARD" data.
"SOFT " data, or data which can be manipulated by its producers, such as sales, earnings, expenses, etc. is the subject of Fundamental Analysis.
Fundamentalists are often disdainful of technical analysts. And vice versa as You well know!.
"The main problem with fundamental analysis is that its indicators are removed from the market itself. The analyst assumes causality between external events and market movements, a concept which is almost certainly false.
But, just as important, and less recognized, is that fundamental analysis almost always requires a forecast of the fundamental data itself before conclusions about the market are drawn. The analyst is then forced to take a second step in coming to a conclusion about how those forecasted events will affect the markets!
Technicians only have one step to take, which gives them an edge.
Their main advantage is that they don't have to forecast their indicators."
"The Wind Calls the Tune"
Outlined below are just a few fundamental ways companies can create earnings:
IE: Cook the Books
Accelerating Revenues
1. One way to accelerate revenue is booking lump-sum payment as current sales when services will be provided over a number of years. For example, a software service provider receives upfront payment for a four-year service contract but records the full payment as sales of only the period that the payment is received. The correct, more accurate, way is to amortize the revenue over the life of the service contract.
2. A second tactic is called "channel stuffing".
Here, a manufacturer makes a large shipment to a distributor at the end of a quarter and records the shipment as sales; however, the distributor has the right to return any unsold merchandise. Because the goods can be returned and are not guaranteed as a sale, the manufacturer should keep the products classified as a type of inventory until the distributor has sold the product.
Delaying Expenses
AOL got in trouble for this in the early 1990s when it capitalized the costs of making and distributing its CDs. AOL viewed this marketing campaign as a long-term investment and capitalized the expense. This transferred the costs from the income statement to the balance sheet where it was going to be expensed over a period of years. The more conservative (and appropriate) treatment is to expense the cost in the period the CDs were shipped.
Accelerating Expenses Preceding an Acquisition
This may sound a little counterintuitive, but bear with me. Before a merger is completed, the company that is being acquired will pay, possibly prepay, as many expenses as possible. Then, after the merger, the EPS growth rate of the combined entity will be easily boosted when compared to past quarters; furthermore, the company will have already booked the expense in the previous period.
"Non-Recurring" Expenses
(An oxymoron if ever there was one.) By accounting for extraordinary events, these one-time charges were meant to help us to better analyze ongoing operating results. It seems, however, that companies take one of these each year. Then a few quarters later, they "discover" they reserved too much and are able to put something back into income (see next item).
Other Income or Expense
This category can house a multitude of sins. Here companies book any "excess" reserves from prior charges (non-recurring or otherwise). This is also the place where companies can hide other expenses by netting them against other newfound income. Sources of other income include selling equipment or investments (a la Amazon.com).
Pension Plans
If a company has a defined benefit plan, it can use some special techniques to smooth earnings. During a bull market, the company can improve earnings by reducing its pension expense - or even record revenues - if the investments in the plan grow faster than the company's assumptions. During the late 1990s, this was done by a number of large firms, some of them blue chips.
Off-Balance-Sheet Items
A company can create separate legal entities that can "house" liabilities or incur expenses that the parent company does not want to have on its financial statements. Because the subsidiaries are separate legal entities, which are not wholly owned by the parent, they do not have to be recorded on the parent's financial statements and are thus hidden from investors.
Synthetic Leases
A synthetic lease can be used to keep the cost of new building from appearing on a company's balance sheet. The lease is a long-term (five- to 10-year) agreement under which a company will pay a fixed lease expense to be in a new headquarters. At the end of the lease, the company is obligated to buy the building, but because of the nature of the lease, this liability is not included on the balance sheet! (Who said accountants were boring and uncreative?) At the time the lease was made, the company may have been in fine financial shape and the economy may have been booming; however, the ability of the company to meet this huge obligation is hard to determine until shortly before maturity (one to two years).
And THEN if all this is not enough "Soft Data" ???
There is always the " Big Bath Strategy" to tend with!!
ie: The strategy of manipulating a company's income statement to make poor results look even worse. The big bath is often implemented in a bad year to enhance artificially next year's earnings. The big rise in earnings might result in a larger bonus for executives. New CEOs sometimes use the "big bath" so they can blame the company's poor performance on the previous CEO and take credit for the next year's improvements.
For example, if a CEO concludes that the minimum earnings targets can't be made in a given year, he/she will have an incentive to move earnings from the present to the future since the CEO's compensation doesn't change regardless if he/she misses the targets by a little or a lot. By shifting profits forward - by prepaying expenses, taking write-offs and/or delaying the realization of revenues - the CEO increases the chances of getting a large bonus the following year.
Salute and Good Luck finding all the qualified staff you require to reach any ONE Fundamental piece of "Hard Data"
PS Sorry Dear friar but I do feel FA is a job for more than one God
"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.
"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893
"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897
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hilarius
Member
Username: hilarius
Post Number: 2055
Registered: 04-2004
Rating: N/A
Votes: 0
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| | Monday, January 29, 2007 - 04:59 pm: |
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Dear Brave Captain
An Australian minister visited an American colleague and noticed that the gold phone to God in the American church required a US $ 10,000 payment in order to secure a connection with the Heavenly Father
He was able to point out that in Australia the same phone call costs only 50 cents, being a local call
So Dear Captain, while all those financial pranks are possible in other markets the honesty and integrity of Australian directors is such that they could never occur here
We are further protected, as increasingly are our American friends, by merchant bankers of such steely integrity and absence of conflict of interest that they are able to strip away all the smoke and mirrors still lingering in just a few corporate accounts
Thus we are so more advanced and honest than in the days of our mis-spent youth, Dear Captain
Even brokers are learning to give sound advice based on real intelligence and understanding rather than the size of Daddy's wallet and the smallness of their brain, as used to be the case
This is all amply demonstrated by the superb quality of your selections every Monday morning which simply could not be so successful without large doses of underlying fundamental understanding
Let us unite to eliminate all dirty tricks, even in the swamplands, so that Fundamentals in the form of prospective earnings yields may be our true Holy Grail, however hidden they may be in the mist and fog of published financial statement fine print.
Consensus future earnings are the Holy Grail ... the authors are far too intelligent and we readers are so superbly gifted that never again will an HIH cross our horizons
As William J O'Neill puts it so succinctly :-
"In our study of the greatest winning companies we found that they all had this in common PRIOR TO their big price moves ..." [he is referring to earnings increases of 18% to 20% over the same period a year before]
He goes on :-
"Many successful investors use 25% or 30% as their minimum earnings [increase] paramater"
And he adds :-
"During bull markets I prefer to concentrate on stocks that show powerful earnings gains ... from 40% to 50% or more."
Dear Captain those paragons of integrity and perspicacity in the institutions are indeed divorced from the market ... this is a wonderful truth ... it means they take many months to re-rate stocks and get all their clients in after profit upgrades ... meanwhile you and I who are so dedicated to finding the earliest signals have a magnificent window of opportunity after earnings improvements are announced, especially where they have not been built into prices by lazy lips and insiders
As we both know lazy lips can sink ships in time of war, but in peacetime those few dishonest insiders who are so rare now can of course pump before they dump, but they are a tiny dishonest minority, unknown among our blue flagships
Why wait for technical flag waving among ships lost at sea trying to read their chart by dim candles, when you can be safely on shore reading the clear FA profit upgrades that will boost charts in weeks and months to come
Dear Captain we are not all day trippers, or week trippers in on Monday and out on Friday
Some of us sip from the Holy Grail of fundamentals which we know will drive the charts onward and upward
I am thinking of offering you a sip from the Holy Grail during my upcoming visit to the gracious financial centre of Melbourne where only honest men abide
I fear though you might spit out the too rich heady wine
With Many Blessings from your Fundamentally Fiscal Friar
Hilarius
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities
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captain_chaza
Member
Username: captain_chaza
Post Number: 2362
Registered: 02-2003Rating: N/A
Votes: 0
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| | Monday, January 29, 2007 - 06:05 pm: |
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Ahoy Dear Friar
That sounds BRILLIANT!!!!!
I /we would all be looking forward to your visit!
Do you need anyone to pick you up from the airport?
I'll get Sea-Cadet-Entertainment-Officer SusieQ on to it straight away as soon as I know!
This could be really BIG and even BIGGER if you could pick the Admiral up on the way?
Lets meet for 3 nights in a row ???
During the days you could always sleep or see the sights if our discussions get light /soft
I feel it would take me no longer than 3 nights to knock all your silly ideas of FA out of your brain
I think it should be done
"Once And For All-Time"
Salute and Gods'Speed
"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.
"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893
"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897
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lafee
Member
Username: lafee
Post Number: 289
Registered: 04-2003
Rating: N/A
Votes: 0
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| | Monday, January 29, 2007 - 08:58 pm: |
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Hilarius,
Your and Mr Oneill's logic is "fundamentally flawed". When one studies the market you are fooling yourself if you take a sample of the best performers and try to find common traits to induct a holy grail. Your study fails to account for the failures.
It reminds me of all the puesdo self help, become a millionaire books & seminars around today. Typically they study a group of successful people to find common traits - traits they assert you need if you want to taste success. Problem is that there are many people with the same traits that are failures, but the failures are not in the spotlight to study.
The other thing is adaption. The participants of the market are thinking people. Thinking people adapt. No fixed rule whether fundamental or technical lasts forever. This is why economist have such a dismal record. They don't understand that everything in the market is fashion - that it. Fashion can sound fundamentally silly but it still prevails. Think of every boom bust sequence in life, nature and of course business. Adaption is the constant in all social science-nothing is fundamentally correct.
A Technical/Quant approach can monitor fashion, Fundamental theory cannot. Unless of course you can determine the fundamental fashion of the time - thing is you will have to travel down the Technical/Quant path to do so.
Cheers
Lafee
If nobody can be certain of anything, how can I be certain of that?
Ayn Rand
When I was young people called me a gambler. As the scale of my operations increased, I became known as a speculator. Now I am called a banker. But I have been doing the same thing all the time.
Ernest Cassel
"My major hobby is teasing people who take themselves & the quality of their knowledge too seriously & those who don’t have the guts to sometimes say: I don’t know...." (You may not be able to change the world but can at least get some entertainment & make a living out of the epistemic arrogance of the human race).
Nassim Nicholas Taleb
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captain_chaza
Member
Username: captain_chaza
Post Number: 2363
Registered: 02-2003Rating: N/A
Votes: 0
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| | Monday, January 29, 2007 - 09:22 pm: |
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Ahoy Dear Friar
Let's continue this argument on
Saturday 10th Feb 2007 over a Real Long Lunch and a couple of beers
I have asked our beloved Entertainment Officer SCO SusieQ to set "The Captain's Table" for this special afternoon
Salute and Please Take Care on your very long voyage to Melbourne
PS Any Chance of bringing along your brother "I Claudius"
I always found to be an Officer's Officer and a Gentleman's Gentleman
(Message edited by Captain_Chaza on January 29, 2007)
"While we stop and think, we often miss our opportunity." Publilius Syrus, 1st century B.C.
"I believe the future is only the past again, entered through another gate."
Sir Arthur Wing Pinero 1893
"There are two times in a man's life when he should not speculate: When he can't afford it, and when he can." Mark Twain, 1897
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hilarius
Member
Username: hilarius
Post Number: 2056
Registered: 04-2004
Rating: N/A
Votes: 0
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| | Monday, January 29, 2007 - 09:33 pm: |
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Monsieur Lafee
I regret to inform you that you are wrong
With cast iron proof I can demonstrate that three out of four portfolios selected on the basis of prospective earnings yields have outperformed the XAO very significantly
The fourth is matching the XAO
Taking all four portfolios in combination the aggregate result is still significant XAO outperformance
More of the individual stocks have outperformed than have underperformed the XAO, and as you know only too well from distinguished TA people you don't even need a 50% win rate to succeed.
Counting the very small number of failures the results are more than satisfactory, and well above 50% are winners
You will have to trust that the chart lines I use to provide my proof truly reflect the stocks selected
Unfortunately I can't tell you the individual stocks as the selection method is not entirely mine and I do not have the permission of the other researcher with whom I developed the selection criteria to disclose either the method or the stocks
In short you have to trust me
Would I lie?
Hilarius (a proponent of combined FA and TA being better than either alone, unless you are a microsecond trader or a day tripper in which case a chart addiction might suffice)
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities
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lafee
Member
Username: lafee
Post Number: 291
Registered: 04-2003
Rating: N/A
Votes: 0
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| | Monday, January 29, 2007 - 10:04 pm: |
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Hilarius,
You may very well be able to "prove" success. But over what time frame? 4 years? More/less? My point is that eventually every social science theory including yours and mine will be proven wrong.
I am not suggesting that your method is not the fashion of the time. Question is when will it change and how will you know when it does. You are also correct in not disclosing your system for that has the potential of destroying your future results. If you system was fundamentally correct you would have nothing to loose through disclosure.
I would never trade a system that was less than 50% accurate. If you are not right more than half the time you are not predicting anything. You are in the field of randomness of which an extended bull market can make fools look like geniuses.
Cheers
Lafee
If nobody can be certain of anything, how can I be certain of that?
Ayn Rand
When I was young people called me a gambler. As the scale of my operations increased, I became known as a speculator. Now I am called a banker. But I have been doing the same thing all the time.
Ernest Cassel
"My major hobby is teasing people who take themselves & the quality of their knowledge too seriously & those who don’t have the guts to sometimes say: I don’t know...." (You may not be able to change the world but can at least get some entertainment & make a living out of the epistemic arrogance of the human race).
Nassim Nicholas Taleb
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