THE “IS THE P/E RATIO IRRELEVANT?” EDITION
30 SEPTEMBER 2010
IS THE P/E RATIO IRRELEVANT?
Guru Ellis Traub to Lead SC Workshop Oct. 6
Just before Labor Day, The Wall Street Journal published an article titled "The Decline of the P/E Ratio," alleging that the P/E ratio is "shrinking in size and importance." It's an allegation that would make even the most seasoned investor gasp.
Is the P/E Ratio losing ground as a metric? Or is it as relevant today as it’s ever been? That's precisely the debate that is going to ensue in the next installment of our ongoing series in the SC Community Forum Workshops!
Author, instructor, software developer, blogger, talk show host and long-time investor Ellis Traub (his complete bio is really too long to print here!) will lead a five-day workshop on the P/E ratio beginning next Wednesday, October 6. Hosted by SC Community Leader Amy Rauch Neilson, the workshop will tackle these topics:
* What is the P/E ratio and why should we care?
* What doesn't it tell us that we think it does?
* What is the Historical Value Ratio?
* Rational Value: A sensible way to value a portfolio
* Is the P/E Ratio still relevant?
"For the intelligent investor who has only a passing interest in the meanderings of the market, the P/E emerges as the perfect tool to evaluate the degree of disconnect between the herd and reality," Ellis points out.
Don't miss this new SC Workshop and the chance to ask Ellis any — or all — of your burning questions on the P/E ratio!
On to this week's headlines . . .
FRUGALITY ISN'T JUST FOR CONSUMERS
Company Earnings Soar on Belt Tightening
Your ever-observant reporter noted with interest an article on Walgreens (NYSE:WAG) earlier this week. The drugstore's stock spiked 12 percent Tuesday on news that the company's earnings had surpassed Wall Street's expectations.
Even more interesting to your ever-inquisitive reporter is the story behind the surge. Though the economy continues to take a toll on front store sales, and pharmacy sales are moderate, much of the company's recent financial boon is due to aggressive cost-cutting measures. The company reports it is on track to save $1 billion in fiscal 2011.
What's your take on the company's strategy? And what happens when it gets to the other side? Will the company's profit margins dip when cost-cutting measures are exhausted — or will it gain a new, stronger foothold? Sound off in The Exchange.
IT'S A TWO-FER!
Buy Toolkit 6, Get Free Copy of Take Stock
Speaking of Ellis Traub and his most impressive bio, if you haven’t yet picked up a copy of his highly-acclaimed third edition of Take Stock — now's your chance! Buy Toolkit 6 within the next six weeks and you'll get a copy of Take Stock free — a $29.99 value!
Designed for beginners but beneficial to all fundamental long-term investors, Take Stock is an important addition to your investing library. This 250-page book describes the basics of common-sense stock investing, with tips and tricks for identifying companies, comparing stocks, and managing a portfolio. You can read a sample chapter and learn more about the powerful concepts contained in Take Stock.
The Toolkit 6 software allows you to quickly analyze promising stocks and manage your portfolio. Developed for both novice and experienced investors, Toolkit 6 features its own unique portfolio management tools that make it easy to monitor fundamental changes in your existing holdings with alerts and color-coded highlights.
If you or a member of your investment club hasn’t yet bought a copy of Toolkit 6, this is a golden chance to create the perfect set of tools for stock analysis. Buy Toolkit 6 now and get your free copy of Take Stock today!
But hurry! This offer is only good through October 25, 2010 — and your reporter has it on good authority that it won't be repeated!
TODAY'S ENTIRELY RELEVANT QUOTATION
"The lower the P/E, especially in the face of growing corporate earnings, the more obvious it becomes that the herd doesn’t understand the nature of investing… And the easier it is to find bargains out there."
— Guru Ellis Traub, who will lead a five-day SC Workshop
on the P/E Ratio beginning Oct. 6.