May 2007 Market Timing Update
"In the short run, the market is a voting machine but in the long run it is a weighing machine. "
This month Bob looks at overall market valuation and he believes it is reasonable because of the modest
rate of stock market appreciation and increasing corporate earnings.
Year Yearend Reported P/E Operating
Close Earnings Earnings P/E
1987 247.09 $17.50 14.1 $19.91 12.4
1988 277.72 $23.75 11.7 $24.12 11.5
1989 353.40 $22.87 15.5 $24.32 14.5
1990 330.22 $21.34 15.5 $22.65 14.6
1991 417.09 $15.97 26.2 $19.30 21.6
1992 435.71 $19.09 22.8 $20.87 20.9
1993 466.45 $21.89 21.3 $26.90 17.3
1994 459.27 $30.60 15.0 $31.75 14.5
1995 615.93 $33.96 18.1 $37.70 16.3
1996 740.74 $38.73 19.1 $40.63 18.2
1997 970.43 $39.72 24.4 $44.01 22.1
1998 1229.23 $37.71 32.6 $44.27 27.8
1999 1469.25 $48.17 30.5 $51.68 28.4
2000 1320.28 $50.00 26.4 $56.13 23.5
2001 1148.08 $24.69 46.5 $38.85 29.6
2002 879.82 $27.59 31.9 $46.04 19.1
2003 1111.92 $48.74 22.8 $54.69 20.3
2004 1211.92 $58.55 20.7 $67.68 17.9
2005 1248.29 $69.93 17.9 $76.45 16.3
2006 1418.30 $81.51 17.4 $87.72 16.2
2007 1482.37 $87.00 17.0 $92.00 16.1 *
* closing price on April 30, 2007.
He is comfortable with a Forward PE ratio going forward of 16 - 17 as an estimate.
Low core inflation is expected to remain low.
The economy will continue to grow at a rate below trend and Bernake will probably be called on the carpet because
of it. It seems only the Fed sees inflation gremlins lurking in every corner.
Consumers are continuing to spend at a moderate pace and they are learning to deal with higher gas prices.
The 60 day Put-Call ratio, a contrary indicator remains very high. Lots of bearish sentiment.
New investors are encouraged to buy on weakness and dollar cost average their way into the market.
Bob believes the S&P 500 index is getting ready to break the previous record high of 1527.46 and if
it does, there will be new recovery highs.
The fed funds rate of 5.25% will remain unchanged, given below-trend economic growth of the economy of
2-2.8%. The long term range is typically 3-3.5%
No changes to Fed policy.
Market Timer Portfolios
No changes to Portfolios
In the same period a year earlier,
the company's predecessor operations prior to its emergence
from bankruptcy protection, the company earned $63 million, or $1.05 a share.
The company said its adjusted
earnings, excluding items, were $61 million, or 14 cents a share,
for the latest quarter.
Sales fell 17% in the three-month
period to $1.32 billion from $1.6 billion in the same period
a year earlier.
The average estimate of analysts
polled by Thomson Financial was for a profit of 20 cents a
share in the March period.
The Toledo, Ohio-based building
materials company said it expects its insulating systems business
to continue to be impacted by the slowdown in U.S. housing starts that's expected to extend well
into 2007 by the National Association of Home Builders.
It backed a projection that earnings
before interest and taxes, or EBIT, should exceed $415
million in 2007, excluding the impact of its proposed joint venture with Vetrotex or other strategic
The stock closed Tuesday at
$31.78, up 3.7%. This
Stuff Just Continues to Amaze
A recording of the conference call is availible for playback or download here:
My opinion: Long Term Hold. Buy on weakness. I'd say a range of 28-32 is an attractive buy range.
Masco, one of my DRIP's also reported earnings:
Masco Corp. (MAS 30.15 +2.94) reported a 30% drop in quarterly net income,
as a decline in new home construction and a moderation in consumer spending
crimped demand for its home improvement products.
Stuff Just Continues to Amaze
However, the results surpassed analysts'
expectations, and shares of the Taylor,
Mich.-based company gained as much as 16% during the regular trading session.
That huge spike is after
The thing is they did badly, but not as badly as everyone expected.
Kind of goes to show - if you believe the company is a quality holding, don't sweat the short term stuff.
Fund YTD Performance
This is kind of interesting in that performance by fund type is all over the map.
I was surprised Fidelity Dividend Growth is lagging as much as it is so I am moving about half
of FDGFX into Fidelity Value (FDVLX). That should pan out a little better.
I think I will also take PSPFX from 3.2% to 5% by trading out some of the Fairholme fund.
Global Resources as a sector for about 5% is probably a good place to be.
Just look at gas and other commodity prices.
I originally thought PSPFX would be a short term play but anymore it seems like a good sector holding.
Monthly Rant, Sermon or Whatever........
None this month. If there is a topic you are interested in and it happens to be something I know something
about, let me know.