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Author: AllTooFoolish Two stars, 250 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5980  
Subject: BI Dow30 Picks for VL Update Dec 6 2013 Date: 12/2/2013 6:02 PM
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Based on the latest VL results as of Monday’s data release, no companies currently qualify as BI Long candidates.
However, on close inspection you will observe that Cisco and Pfizer are the only two stocks that are below their 
downside price target. However, neither currently qualify as a buy because they do not have >+10% EPS growth prospects.

Market Valuation (Dow 30): 
The market continues to trend more and more on the overvaluation side. It currently stands 16% overvalued using the BI method. 
It certainly warrants prudence at this stage in the game as 2014 approaches.
Downside: -31%
Upside:   +1%

Long Buy Rules: 
I am using the following TTD rules for Long position considerations:
1. Year-over-Year EPS growth must > 10%, which are the next 4Q / current quarter + previous 3 quarters earnings results
2. VL 3-5 Year price appreciation > average price appreciation of the market
3. When calculating ROE and BV figures, ignore years when are negative, but must have at least 7+ years of data to be 
   included in final consideration
4. Avoid erratic ROE ratios, that is where they are > 2std deviations = Curr ROE > (10 Year Avg + 2 * Std Dev)
5. ROE and BV current figures must be updated by VL to be considered.

There is a separate tracking post that I post to tack the annual hold selection for the remainder of the year. 
I also added two new columns to this worksheet. They are: 1. An indication if VL has updated the current year’s 
BV and ROE. If yes, then the column will indicate TRUE, if not then FALSE. 2. An average of the previous 4 VL 
update’s Downside Price, showing the price’s discount to this value. This is a simple average of the past
four updates in the Downside price. This new metric was never mentioned in the TTD book, but it might be of  
use to consider in case baseline valuations swing in one period during the evaluation time frame.  

Evaluation time frame: 
Current = 2013
Benchmark = 2003 thru 2012

Summary of Results


	VL	        Current	ROE/BV	Down	Up     %<10Y   %<10Y	EPS	Div    3-5Y L 3-5Y H VL 3-5Y   ROE	
Ticker	Date	        Price	Updated	Price	Price	Down	Down4Qs	Delta   Yield   VL $	VL $	% Chg	<2STD	Name
CAT	22-Nov-13	84.71	TRUE	52	90	62%	32%	-9%	 2.8 	105	145	41%	FALSE	Caterpillar Inc.
JNJ	22-Nov-13	94.22	TRUE	72	89	31%	32%	3%	 2.8 	90	120	15%	FALSE	Johnson & Johnson
MCD	29-Nov-13	96.41	TRUE	78	107	24%	22%	7%	 3.3 	115	140	31%	FALSE	McDonald's Corp.
CVX	6-Dec-13	123	TRUE	77	108	59%	36%	0%	 3.3 	125	155	14%	FALSE	Chevron Corp.
XOM	6-Dec-13	93.89	TRUE	67	91	40%	33%	4%	 2.8 	110	135	30%	FALSE	Exxon Mobil Corp.
BA	13-Sep-13	134	TRUE	62	92	118%	124%	9%	 1.5 	105	140	-9%	FALSE	Boeing
TRV	13-Sep-13	89.48	TRUE	62	87	45%	52%	3%	 2.2 	95	120	18%	FALSE	Travelers Cos.
UNH	13-Sep-13	74.34	TRUE	48	75	56%	56%	7%	 1.5 	85	115	34%	FALSE	UnitedHealth Group
T	20-Sep-13	35.03	TRUE	28	39	24%	23%	8%	 5.2 	45	50	34%	FALSE	AT&T Inc.
VZ	20-Sep-13	49.2	TRUE	26	36	90%	89%	16%	 4.3 	60	75	35%	TRUE	Verizon Communic.
CSCO	20-Sep-13	21.1	FALSE	27	44	-23%	-25%	7%	 3.2 	30	35	52%	FALSE	Cisco Systems
HD	27-Sep-13	79.99	TRUE	44	67	80%	86%	13%	 1.9 	80	100	11%	TRUE	Home Depot
PG	27-Sep-13	83.44	FALSE	55	70	51%	48%	8%	 2.9 	90	110	18%	FALSE	Procter & Gamble
INTC	4-Oct-13	23.68	TRUE	23	38	2%	0%	6%	 3.8 	35	45	67%	FALSE	Intel Corp.
IBM	4-Oct-13	178	TRUE	162	220	10%	9%	11%	 2.2 	235	285	45%	FALSE	Int'l Business Mach.
DD	11-Oct-13	62.02	TRUE	47	70	33%	32%	27%	 3.0 	75	90	34%	FALSE	Du Pont
MRK	11-Oct-13	49.91	TRUE	32	50	57%	53%	6%	 3.5 	50	60	10%	FALSE	Merck & Co.
PFE	11-Oct-13	31.84	TRUE	37	53	-15%	28%	-40%	 3.0 	30	35	1%	FALSE	Pfizer Inc.
GE	18-Oct-13	26.61	TRUE	21	31	25%	22%	12%	 2.8 	30	45	39%	FALSE	Gen'l Electric
MMM	18-Oct-13	130	TRUE	88	122	47%	47%	10%	 1.9 	125	150	2%	FALSE	3M Company
UTX	18-Oct-13	111	TRUE	76	107	45%	46%	16%	 2.1 	130	155	27%	FALSE	United Technologies
GS	18-Oct-13	170	TRUE	92	169	85%	92%	-6%	 1.3 	205	310	53%	FALSE	Goldman Sachs
KO	25-Oct-13	39.77	TRUE	32	43	24%	21%	9%	 3.0 	50	60	36%	FALSE	Coca-Cola
WMT	1-Nov-13	80.72	TRUE	70	90	15%	11%	6%	 2.5 	95	115	29%	FALSE	Wal-Mart Stores
NKE	1-Nov-13	79.89	FALSE	42	61	92%	92%	6%	 1.2 	80	95	10%	FALSE	NIKE Inc. 'B'
DIS	8-Nov-13	71.02	TRUE	48	71	49%	45%	15%	 1.1 	70	85	9%	FALSE	Disney (Walt)
JPM	15-Nov-13	57.52	TRUE	35	56	63%	27%	17%	 2.8 	65	95	39%	FALSE	JPMorgan Chase
AXP	15-Nov-13	86.43	TRUE	57	84	51%	51%	9%	 1.1 	85	115	16%	FALSE	Amer. Express
V	15-Nov-13	205	FALSE	136	230	50%	54%	19%	 0.8 	295	405	71%	TRUE	Visa Inc.
MSFT	15-Nov-13	38.48	FALSE	34	48	14%	13%	-5%	 3.0 	45	55	32%	FALSE	Microsoft Corp.
Dow30		        16,062	       11,127  16,289	                         2.8  18,206  23,376 			Dow Jones Industrial Average
Appreciation Potential		  	-31%	   1%				        13%     46%     28%

Disclosures and Useful Terms
VL Date is the date of the last summary report update from Valueline as indicated in the post’s subject line.
All data sources from Valueline Dow30 reports made publically available on the VL website. http://www.valueline.com/Dow30/index.aspx

Current Price is the closing price of the stock as reported by VL, which is usually one week prior to the date 
of the time period mentioned in the posting subject line.

ROE/BV Updated is an indication if the stock’s BV and ROE have been updated through the end of the Benchmark 
evaluation time frame.

10Yr Down is the 10 year downside price. The company must have at least 7 years of non-negative ROE data to qualify.

10Yr Down4Qs is the 10 year downside price averaged over the previous 4 quarter’s valuation price.

10Yr Up is the 10 year upside price. The company must have at least 7 years of non-negative ROE data to qualify.

Both upside and downside are calculated using method outlined in TTD book.
Also a discussion of calculating the upside and downside can be found here:
http://boards.fool.com/Message.asp?mid=20916205&sort=who......

%<10Y Downside is the current price divided by the 10 Yr downside expressed as a percentage.

EPS Future Delta is the projected growth in EPS for the next 4 quarters versus the last four reported quarters.
I use the latest EPS data from the VL spreadsheet which are updated as soon as new earnings are reported.

Div Yield is the current % dividend payout ratio per share.

3-5 Y Low/Hi Price Est. is the downside/upside price estimate which is calculated using the projections of Book Value 
and ROE as discussed in TTD.

Min VL Price Appreciation is the expected change in price from current price to low end VL projected 3-5 year
appreciation price.

ROE >2STD is part of a margin of safety consideration, which is briefly discussed in TTD on pg 70-71. 

I compare the current year's ROE versus the last 10 years of ROE data. If the current ROE is greater than average (10 Yr
ROE) + (2 * stdev(10 Yr ROE)), than this column is TRUE, else it is FALSE. This tells me that the stock's ROE is much
higher than its historic average and should therefore be avoided.
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