Author Topic: Chart of the Week - Earnings  (Read 3703 times)

ericopoly

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Re: Chart of the Week - Earnings
« Reply #10 on: March 20, 2009, 10:13:48 PM »
I find this link interesting for getting a quick view of the S&P500 today:

http://www.indexarb.com/capitalizationAnalysis.html

The largest 100 companies make up 89% of the index.  The next 400 just 11%.

The last column I find helpful, as you go down the list it computes the cumulative % weight inclusive of all the companies preceeding it on the list.


Oops, I guess it was 68.8% for the 100 largest.  I think I read the 6 as an 8.  Anyhow, the last 100 smallest companies in the index comprise only 2.2% of the index weight collectively.  That's rather interesting.



Here is something I found on that site that is very cool:
http://www.indexarb.com/stockVsIndexesLeftColumn.html#sp500IndexAnalysis

Follow that link and look at the S&P500 table -- then click on the "Three months" link.  It will show you, for each company, how it performed relative to the index for the past 3 months.  Then you can change to 1 month if you like.  It is useful to illustrate visually where the dead weight is.


ericopoly

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Re: Chart of the Week - Earnings
« Reply #11 on: March 20, 2009, 11:10:14 PM »
As a result of an 11.4% headwind from currency translation, sales for the quarter were down 7.5% despite gains in organic sales and contributions from recent acquisitions.

That is a quote from Heinz Q4 2008 conference call.

11.4% headwind from currency translation?  Yikes. 

http://seekingalpha.com/article/122372-h-j-heinz-company-f3q09-qtr-end-1-28-09-earnings-call-transcript?page=3


Notice that they said gains from organic sales?  This stock is down 37% from 52 week high, because this recession is going to wipe out their earnings... or is it?
« Last Edit: March 20, 2009, 11:14:15 PM by ericopoly »

Smazz

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Re: Chart of the Week - Earnings
« Reply #12 on: March 21, 2009, 07:17:29 PM »
by just reverting to the mean some of us are going to be making alot of Dinero.. ;D
Hopefully everyone took some profits as I always encourage people to do in times of excess.

Wait it out as always, accumulate if you can - be prudent and spend your next $ (investment wise) like its your last.

This has always helped me navigate.


ericopoly

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Re: Chart of the Week - Earnings
« Reply #13 on: March 21, 2009, 11:12:32 PM »
This link here has a few different ways of looking at things -- different charts for things like historical P/B of the S&P500. 

http://seekingalpha.com/article/124829-s-p-500-valuation-analysis-near-bottom

Looks like P/B in early March was about 29% higher than in 1981.

In addition, RBC Capital Markets has this chart showing that 1/3rd of index equities trade below book value in both Canada and the US, levels only seen in 1990.


There is also some mention of a "Rule of 20" there -- I wish I had known that when Mungerville thought I was babbling about the "Fed Model".  I had actually never heard of the Rule of 20, but it's possible that it was popular back in 1981 and might be why the market was priced where it was... here me out, it was at an 8 P/E at the time and inflation rate was 12%.  So, 8+12=20.  It's not the Fed Model, it's different.  Anyways, it is a relic.


The year over year drop in S&P500 banking stocks was more severe than during any such period before, inclusive of the Great Depression.  Here is a chart of that:
http://lh4.ggpht.com/_Iz4sLjjtkLc/SbKBaNThPoI/AAAAAAAAAZg/L2WP6iEHZbE/s1600-h/image40.png

« Last Edit: March 21, 2009, 11:19:28 PM by ericopoly »

ericopoly

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Re: Chart of the Week - Earnings
« Reply #14 on: March 21, 2009, 11:42:56 PM »
Yeah, you make a valid point. I could probably dig up just operational data, however it might take a bit of work ... too much unfortunately.  :-\
I've a Busy weekend.
But you can imagine what it would probably be like in any event, probably down to the 1990 mark. Still a big drop.

S&P is currently at 768 ... so you can make your own conclusions about what sort of forward earnings yields the market is on. S&P Earnings of 20-45 wouldn't be too far off the mark.


This article has a chart that shows operating vs reported earnings per share:

http://seekingalpha.com/article/126347-s-p-500-p-e-ratio-at-troughs-a-detailed-analysis-of-the-past-80-years?source=article_lb_author

Here is a link directly to the chart:

http://lh4.ggpht.com/_Iz4sLjjtkLc/Sb6Y-w9K4EI/AAAAAAAAAuk/TGVWjgpyp-c/s1600-h/image12.png


And here is a link to a chart that then factors it into P/E ratio:

http://lh3.ggpht.com/_Iz4sLjjtkLc/Sb6Y_vYqJuI/AAAAAAAAAus/6PavLpuaGS0/s1600-h/image13.png



With the release of its Q4 2008 results, AIG subtracted $5.13 to S&P 500 Index operating earnings and $7.10 to reported earnings in the December quarter. These losses will negatively impact the S&P 500 Index earnings throughout 2009. Yet, AIG is 0.02% of the S&P 500 Index so its market value has literally no meaning to the overall Index. Were the US government to completely nationalize AIG tomorrow, its removal from the Index would make no difference to the Index value but the removal of its losses, operating and reported, would immediately boost Index earnings by 7.8% for operating and 17% for reported.
« Last Edit: March 21, 2009, 11:53:01 PM by ericopoly »

Uccmal

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Re: Chart of the Week - Earnings
« Reply #15 on: March 22, 2009, 06:00:08 AM »
Very interesting charts: 

Observations:
- As you guys mention the earnings are badly skewed downwards at the moment due to the AIGs, Cs, etc.  They make up a tiny part of the capitalization weighting but a huge part of the earnings.
- The earnings are also badly skewed downwards due to the US dollar going up last year.  So, The GE's of the world bought in less US cash, on conversion.  A dropping US dollar will raise earnings in US cash by a potential 20%. 
- Just a normalization without the one time writedowns, and the currency, could bring things up 20-50% (a guess).
- I personally thing that the earnings (2009) on an adjusted basis will probably be 20% lower at a maximum.  So that would put it around 60-65 at a low.   

Back to doing my income taxes. 

GARP tending toward value