INVESTORSFRIEND.COM NEWSLETTER JULY 7, 2002
UPDATES
The research report for BW Technologies that is available for members only has been updated. With a P/E of 26 it is pricing in a fair amount of growth and so I am calling it only a weak buy despite its growth. It can be considered a speculative buy if you are willing to pay up for more than 20% growth.
My most recent reports are available to members of BayStreet.ca. You can access them by signing up the no obligation free trial or by joining their paid membership. I am ending my contract with BayStreet as of the end of July. By the end of August I will make those reports available to members of this Site (not necessarily free of charge though).
Starting in August I expect to make more reports available to members of this Site.
I am cutting well back on my old practice of updating existing reports. This will allow me to focus on looking for new bargain companies. I will be periodically updating older reports that seem like clear buys or clear sells.
LEARNING FUNDAMENTALS
I have posted a very comprehensive article on CASH FLOW. Companies and analysts tend to use the word cash flow very loosely and it has several meanings. This article goes through the various meanings in detail and will help you understand when cash flow should be looked at and when you are better off concentrating on net income. This is a technical article but well worth the effort for investors who are interested in learning about fundamentals.
MARKET OUTLOOK
Efforts to forecast the future direction of the market mostly seem futile, but here are my thoughts…
The Canadian and U.S. economies both seem strong. We seem to moving out of the surprisingly mild recession.
The stock market might go up with an improving economy but it does not have too.
P/E valuations are still high and could contract significantly.
Low interest rates support the high P/Es and this should continue.
A further major terrorist attack is always a risk and would send markets significantly lower.
Investing in stocks with excellent fundamentals in terms of high profitability, low P/E, low debt, and a good outlook should be a good strategy in any market. That increasingly is my goal. I will take fewer chances on lottery ticket type stocks.
OPPORTUNITIES
I’m sure that this market pessimism will yield some significant bargains. I believe that the type of value analysis that I provide will uncover some of these bargains.
Psychologically it will be extremely difficult to buy stocks at or near the bottom of the market since, by definition, they will have been falling for a long time. But clearly that is where the biggest opportunities will lie. This is where a mechanical process of selecting bargain stocks will be valuable. If a stock is truly a bargain then there is little harm if it does fall after you buy it, since a true bargain stock will eventually rise along with its earning.
JAIL TIME
I absolutely support applying the full extent of the law against executives that committed fraud or were grossly negligent regarding earnings reporting. I always check executive compensation. When executives are paid multi-millions it is a sign of greed and excess. I don’t mind when executives get rich along with shareholders, but when executives get rich by fleecing shareholders then they need to be punished for any crimes committed.
Next Issue:
Due to vacation, I don’t expect to produce the next issue of this newsletter until late August. Meanwhile I hope to continue to update some information on the Site. Please visit the Site periodically. Hopefully we will all have better market results over the summer.