tratto dal giornale/newsletter otc (i ribassisti e gli eterni piagnucoloni farebbero bene a leggere)
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New Ideas
This Memorial Weekend's edition contains some thoughts on the future of large cap stocks being driven up by a return to the "Old Economy", fueled by Globalization. You really don't need my help to decide if the DOW is the place to be, but I have uncovered a few "Old Economy" micros who's business is booming. The next few ideas will have a common theme: Understandable- understandable businesses with understandable goods and services. Throwback ideas is where the action is right now, and I've got two good ones in the works. With the spring cleaning out of the way, we have made room for some new ideas.
Dow Headed To 20,000? You Better Believe It!
I am so sick of hearing doom and gloomers whine about inflation, commodity prices, currencies falling apart, the mythical sub prime mortgage meltdown, collapsing home values, and the death of the "overleveraged" American consumer. The "experts" have been forecasting this for years, but so far their dire predictions have been unmet.
If you don't get what globalization is doing for the behemoth American companies, you are simply not getting the way the world has changed. Guess what globalization means to the venerable Dow Jones Industrial Family? 20,000 in the next four years. That's right- I'll say it- 20,000.
Let's look at some key factors driving the big stocks:
Valuations/Yields/Earnings: DOW Currently Undervalued By 25%
When comparing valuation, you have to compare to something. Stocks vs Bonds is time tested. Do you want to own the most secure corporate bonds on Planet Earth?- you are going to get a yield of about 5.5% in today's market. Lower interest rates lead to expanding PEs and higher stock prices.
Now, if you took all the profits generated by the companies in the DOW and divided by the price, do you know what your yield is? About 6.5%. That's right: The DOW's profit percentage yield is higher than the yield on corporate insured bonds.
Over the past century, the DOW profit yield has generally been lower than bond yields- about 10 basis points (1%) on average. This means, just to get back to a normal profit yield as opposed to bonds, the DOW would have to appreciate 20% to 25%. Price up, yield down. Down to 4.5%.
Add another 10% per year for earnings growth, and have the DOW finding its way to 20,000 in the next 4 years, and that's just one metric.
Globalization and Earnings Growth
Globalization changes the growth potential picture for DOW companies. How did they get so big in the first place? Providing goods and services for an expanding North American economy throughout the 20th Century.
Fast forward to the 21st Century. There are now about 2 billion new consumers emerging out of the Stone Age into the world of free enterprise, with credit cards, jobs with benefits, and prolific consumption. They need cars, homes, clothes, consumer electronics, and junk food. It's a massive expanding market, and it's fueling the same old economy names that serviced the infrastructure growth in North America in the last century.
So, let's look at PE Ratios- the time tested fundamental metric that every analyst loves. PE Ratios are determine by dividing the price of a stock by its earnings. Higher PEs assume higher growth, and greater risk as well.
Over the past 40 years, the DOW's PE has averaged 14.4%. However, stocks generally support higher PEs when bonds are high and interest rates are low. It seems interest rates will remain low for the foreseeable future.
Companies become more valuable when they have more customer opportunities- larger markets in which to sell their goods and services. 2 billion more consumers is a lot of new customers- just ask Caterpillar or Boeing- two old economy companies capitalizing on globalization.
With interest rates low and likely to stay that way, Globalization will lead to a new era of PE expansion- it simply makes sense. Look for the venerable DOW to trade up into the 18 PE range as it did in the 90's. That gives us another 25% upside over the next four years.
Cyclical Nature
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On a global basis, it's 1950 all over again. Highways, bridges, roads, schools, office buildings- they're being built with local labor, materials from all over the world, and good old American know how and equipment.
Let's look at history- A look back at the DOW since the 1950's is revealing. Circled in green is every multi year pullback. They all led to higher levels. The stock market was the place to be in the 90's as the wave of technology expansion crested with the development of the Internet. The pullback since 2000 is the longest on the chart, which suggests the next move up will be proportionately long as well.
As we turned the century corner, the tech Bubble burst, sending the market into a free fall. 911 followed and sent the economy into the toilet.
Condo flipping became the favored investment for the masses, and the large cap stocks barely traded sideways for five years. Commodity stocks roared as globalization created demand for resources.
Now, large caps are coming back. Old economy companies, fueled by a worldwide environment akin to the US in the 50's, are moving. As further proof of the undervalued nature of large caps, giant pools of capital known as "Private Equity" are being assembled $20 billion at a clip, and simply buying large cap companies at big premiums to take them private. These investors are not stupid. They are buying value, and they know it. 12 companies are coming out of the S&P 500 and going private by year's end.
Another factor limiting the supply of stock is the roughly $12 trillion going into stock buy backs. Large caps, flush with cash and looking to get better pricing in the market, have figured out their shareholders get a better return if they use their cash for buybacks instead of paying dividends. In a buy back, the shares are retired, and EPS goes up without any profit improvement, making the stock more valuable and leading to price appreciation.
Consider this: Warren Buffet, considered perhaps the greatest long term investor of all time, is buying railroads. Does it get anymore old economy than that? There were railroads a century before the Henry Ford's first Model T rolled off the assembly line in Detroit. DOW 20,000?- You better believe it.
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20.000 ?? per me un pò di più; in prima pagina del topic, c'è un mio grafico al riguardo;
ne posto un altro, migliorato e più semplice (secondo me)
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notiamo subito che, il primo grande impulso partito dalla caduta del '29 è stato raddoppiato oltre 2,5 volte
ed ora naturalmente va per la terza volta verso i 23.000/24.000
tutti sanno che in borsa l'unico vero targhet facile ed abbastanza sicuro è il 2x-3x-4x dell'impulso
notiamo, al primo raddoppio (200%), 20 anni di laterale;
al secondo raddoppio (300%), una accelerazione rialzista fino al 2000 e poi il pull back a 7181;
sarebbe dovuto essere 5000 come si vede dal grafico, ma il mercato ha voluto fermarsi a 7000;
da lì, 10.10.2002, si è ripartiti per i 23.400 , 400% dal 1932 (400% semilog o 15.000% lineare)
se notate il doppio indicatore (due stessi adv/decl partenti da zero e con 2 frame diversi)
notate che quello veloce è ancora al di sotto di quello lento ed il grafico dà la fortissima
sensazione che l'indicatore lento verrà rotto al rialzo (con quello che ne consegue)
quando topperebbe il DJI per il grandissimo e lunghissimo tonfo ??
dal grafico sembrerebbe : giugno 2016 !!!!
quindi si salirebbe (naturalmente con alterne vicende), per altri
9 anni
altro che piagnistei c'è da sopportare per tutto questo tempo!!
enso piuttosto che non sai “disegnare” grafici del tutto-,
