I know that stock valuation hinges on earnings, and its perceived future growth, or lack thereof. Operating out of that most basic premise, I have access to forward-looking earnings estimate data for thousands of issues, and I am able to chart that data, so as to determine what the Wall Street analytical community, and those in the trust, bank, investment and insurance companies are planning to do with those dollars they allocate to stocks.
Since the turn of the year, estimates have been getting revised all over the place… a good many up, but it’s now obvious that a good many more have been down! In fact, this needs to be watched more carefully than I have been giving to it because, if the trend of earnings estimate revisions does not reverse itself soon, as in the next couple of weeks, the trend of the estimate revisions will clearly be signalling a U.S. economic recession to go right along with all the rest of the world. Isn’t that exciting?
Now, there’s something else I know, and I have written of it not long ago. Estimates normally, in the past, have gotten revised downward right after a new year starts, and has been doing so at least since this bull commenced in March of ’09. But, they trend downward only until into February a ways, and then they turn back up. So, you can just guess what I’ll be watching for!
I’ll be watching this EPS trend closely in the coming weeks to see if they can give a glimpse of any new upward economic growth to give one hope that the good ole U.S. of A. is going to be on any kind of a growth track at all in the coming year.
Like I opened, stock valuation hinges on earnings and its perceived future growth. If the growth isn’t there, and contraction is in the picture, share prices will certainly be headed further south than they already have! The jury’s still out, but while they’re deliberating, we can expect some kind of a verdict in just the next couple of weeks, or so, I would expect. Stay tuned.
I just took a look into this, too… I have a means of evaluating stocks with a formula that is quite useful in determining a ‘true’ value for a company’s shares. It may not be perfect for each individual firm, but when applied to a great many of them, they average each other out, and the result can be charted, just as the actual stock price itself can. Doing this work on all 500 companies within the S&P 500, but without going into specifics, I can tell you this: Stock price valuation, by the formula employed on all 500 issues resulted in a peak valuation on May 29 of 2015… and since that date, has fallen off almost precisely 20%, and is still falling by the day! Since the earnings estimate data I refer to above is used as the very basis for the calculation that results in attempting to assess some proper valuation to the stocks in the 500, it stands to reason, I suppose, that the value slide I observe would likely come to a halt within the next couple or three weeks, too, as the estimates might commence to turn back upward… if they do!
It’s obvious there was a real market turn the morning of Wednesday the 20th, but it has yet to catch any fire and take off. Overseas, as of 4:30 a.m. EST… our futures are up by nearly 1%, and other markets around the world are having a good day. It is time to lift off!
One hour before the open. Overseas markets have had, or are having a good day. Our own futures have backed off some, but are still up by .5 to .7%. We need to rally, or it will fail and collapse, as there are tremendous pressures to the downside that need to be overcome, and a great battle is going on, which will resolve within the next week, two or three… I’m quite certain of that!
Here’s to your successful investing!
Harold F Crowell