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THE P/E INFLATION EDITION
28 OCTOBER 2010
IS P/E INFLATION THE FUTURE?
Strong Companies May Provide Hedge
“How do we determine a good entry price if the future is P/E inflation?” That’s the question posted earlier this week on The Exchange by brand-new StockCentral member Wolfgang Spendel, who writes:
“I’ve been wrestling with buying dividends at a good price. Assuming globalization will go forward and future inflation could become pretty high, how do we set a fair price? I've just started using this website and using the screens available. Screens I've run thus far do not result in a reason to buy anything, because the stocks are overpriced by historical standards, even in this so-called market under duress. Therefore, how do we get a handle on the macroeconomic changes underway?
The recent P/E Ratio Workshop conducted by Ellis Traub seems an excellent place to continue this discussion. Read Wolfgang’s post in its entirety, then be sure to add your own two cents (what would that be in future inflationary dollars?). And, of course, be sure to welcome him to the SC Community!
On to this week's headlines . . .
SURPRISE, SURPRISE
Microsoft a Dying Brand — and Record Profits for Ford Motor?
Your reporter declares that recent headlines are proof positive that no one can predict the future of the stock market. Was it not just two years ago that the automotive industry was declared doomed? A dinosaur? Beyond redemption?
Then came the news yesterday that Ford Motor Co. posted a record third-quarter profit of $1.7 billion — the likes of which had not been seen since the automaker posted a $1.1 billion profit in 1997 — and that the company could be headed for a record year. Perhaps even more impressive are the reported reasons behind the automaker’s success, including a strong product line, momentum in North America, and continued success at Ford Credit.
As if that weren’t enough to turn your reporter’s head, the story on Ford Motor Co. ran alongside one on Microsoft, in which the computer giant was labeled a “dying consumer brand” because the company has fallen behind on a number of counts, including Web browsing, social media, search, and gaming. Perhaps most shocking was the news that many businesses significantly delayed their purchases of new Windows licenses because Windows Vista had been plagued with bugs.
What does this mean not just for Ford Motor Co. and Microsoft, but what does it say for companies in general as we emerge from the recession? Logon to the StockCentral Community Forums and chime in.
IS IT TIME FOR A FOURTH LINE?
SC Member Ponders Quality
“Is it time to add a fourth line under ‘Quality’?” That’s the question SC Member Jack Hills posted recently in the SC Community Forums.
“To expand a bit on this issue,” he writes, “Section 2 (Quality) has three lines now. It used to be just two. But I never felt comfortable judging quality on so few criteria. For instance, STRA (Strayer Education, Inc.), AFAM (Almost Family, Inc.), DECK (Deckers Outdoor Corp.), and EBIX (Ebix, Inc.) have too many eggs in one basket. AFAM has a problem with the government just like STRA. And what about DECK? A big part of the success here is those UGG boots. But women/girls change their fashion ideas on a dime. EBIX looks good quality-wise, but there is not a lot of product variety.
So, is Jack right? Is it time to add a fourth line under ‘Quality’? Join Jack in the Strayer Education, Inc. Forum to continue the conversation.
TODAY'S ENTIRELY RELEVANT QUOTATION
“It's been the same story all year long. Better pricing in North America, and that offsets the small losses in Europe. The North American market is a real earnings driver."
— David Whiston, Morningstar Automotive Analyst, commenting on Ford Motor Co.’s record third-quarter earnings report