Earnings
A Major Market Top in the Making
Since turning negative on July 2, the Major Trend Index has deteriorated very rapidly. Major stock market top now seems to be developing. There are now five stock market positives and seven negatives.
View from the North Country
“In Search Of Earnings Disappointments”, Jim Floyd’s late March “The Numbers Game” publication and Perception II’s new clean look. The U. S. Murder rate is now decreasing…This is very surprising to most of us. The Republicans have cleaned house in the House, sharply reducing costs and improving efficiencies.
Earnings Momentum: New Evidence of Deterioration
While Earnings Momentum looked relatively strong for the fourth quarter of 1995, there are some very early warning signals beginning to appear.
Earnings Momentum Quiz
There have been some big headline earnings disappointments, but the overall earnings trend remains pretty solid for now. Based on our analysis of up earnings reports/down earnings reports, things look good. The current ratio is still indicative of a strong economy.
Catching a Falling Knife?...Buying the Semi’s
Basically, things are still pretty healthy for the chip makers. This industry has not fallen apart, it’s just not growing at the unsustainably high rate of the past several years.
View from the North Country
Thermal pollution time…Steve Leuthold’s 1996 views (and 1995 reviews) on stocks, interest rates, economy, dollar, deficit, earnings, alternative investment areas and, yes, the Super Bowl.
Just How Good Will It Get?
Earnings and profit margins have soared since 1992. Operating earnings for the S&P Industrials are estimated at $40 here in 1995, and this estimate may prove to be conservative.
Earnings Momentum: Q3 Reports Show Some Fade
Earnings Momentum still relatively strong, but some fade is evident. More of a fade is expected as later quarterly reports come in.
Updating Our Earnings “Catch Up” Model…Spectacular Earnings Growth, Or Just A “Normal” Return To Trendline?
Corporate earnings growth was well below the trendline during the period of 1988-1993. Overall, earnings growth is now moving back in line with long term trends.
Does A Steady Earnings Pattern In Itself Lead To Superior Stock Price Performance?
At this point, we do not see any clear signs that historical earnings consistency leads to outperformance relative to inconsistent earnings companies.
View from the North Country
Check out the new issue of The Numbers Game for a list of 120 companies with “Red Flags” which could potentially lead to earnings disappointments. Reminders and insights from one of Wall Street’s best: Jeremy Grantham, co-founder of Grantham, Mayo, Van Otterioo & Company.
Earnings Momentum: How Much Better Can It Get?
Earnings momentum may be peaking. The economy should slow by mid-1995, but analysts may not be factoring this into estimates. Also, year over year comparisons will be tougher as 1994's big earnings numbers get factored in.
View From the North Country
Economic growth and stock market performance don’t go hand in hand - the stock market looks ahead. Don’t be surprised by more wage irrflation. The AdvantHedge short selling program is updated and explained because readers have expressed a growing interest (maybe it’s the market).
Update on Leuthold Valuation Benchmarks
The strong second quarter called for an upward revision in our 1994 earnings estimates. Revised book value calculations for the DJIA and S&P indices were also calculated in August. These proved to be significantly lower than our estimates. Thus, some necessary revisions in our valuation Benchmark work is warranted.
Major Trend Index Improved, But Still Negative
It still looks like a bear market to us or, at minimum, an old bull market that is topping out.
Major Trend Index Still Says Bear
Major Trend still in "negative" territory and continues to deteriorate. Downside equity market risk viewed as significant.
Stock Market Observations
February was a tough month for the stock market. Stock Market performance during various GDP and earnings growth environments and what we currently view as the most likely scenarios for 1994.
Building a "Catch Up" Future Earnings Model
Corporate downsizing related write-off’s, combined with significant accounting write-offs have thrown a monkey wrench into many earnings models, necessitating adjustment for recurring/non-recurring items. ROE/book value models have been rendered virtually useless. Model revisions are needed.
Examining Historical Earnings Growth
Based on the analysis herein, combined with the lack of earnings progress since 1988, we conclude that future earnings growth projections in our earnings model may be too conservative.
Worth Noting
Last issue, this publication focused on the current institutional fixation on earnings momentum and earnings surprise in terms of stock selection and stock retention. Ultimately this investment strategy will be over exploited, but when?
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