Using Forward Earnings

We have noted the poor fit — both descriptive and prescriptive — of using backward-looking earnings as a valuation measure.  Let’s consider a look at forward earnings.  The chart here shows Thomson First Call forward earnings versus the yield on the ten-year Treasury note.  It is a simple method, testing the idea that investors look […]

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After the Fed

What will happen when the Fed is finished with the tightening cycle?  To get a dash of insight, take a look at the Fed Funds rate over time. When trying to predict something, you want to look at similar instances in the past.  There is a piece of research from a big-time firm that is […]

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P/E ratios: Forward or Backward?

The stock market is a market of stocks.  Think about how everyone chooses a stock investment. You can look at the history of earnings — and you should.  Past earnings show how the company has performed, the numbers are set, and our information is as good as possible. Good analysts do not stop there, since […]

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Determining the Contrarian Position

Continuing our analysis of the Contrarian Approach to investing, a concept we strongly endorse, we run headlong into the question:  Where is the crowd?  We want to be somewhere else! Much of the opinion about market sentiment is anecdotal.  Those with contacts in the hedge fund community claim to know which way positions are leaning.  […]

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