INVESTORSFRIEND.COM NEWSLETTER - JULY 7, 2002
UPDATES
The research report for BW Technologies
that is available for members only has been updated. With a P/E of 26 it is
pricing in a fair amount of growth and so I am calling it only a weak buy
despite its growth. It can be considered a speculative buy if you are willing to
pay up for more than 20% growth.
My most recent reports are available to members of
BayStreet.ca. You can access them by
signing up the no obligation free trial or by joining their paid membership. I
am ending my contract with BayStreet as of the end of July. By the end of August
I will make those reports available to members of this Site (not necessarily
free of charge though).
Starting in August I expect to make more reports available to members of this
Site.
I am cutting well back on my old practice of updating existing reports. This
will allow me to focus on looking for new bargain companies. I will be
periodically updating older reports that seem like clear buys or clear sells.
LEARNING FUNDAMENTALS
I have posted a very comprehensive article on
CASH FLOW. Companies and analysts tend to
use the word cash flow very loosely and it has several meanings. This article
goes through the various meanings in detail and will help you understand when
cash flow should be looked at and when you are better off concentrating on net
income. This is a technical article but well worth the effort for investors who
are interested in learning about fundamentals.
MARKET OUTLOOK
Efforts to forecast the future direction of the market mostly seem futile,
but here are my thoughts...
The Canadian and U.S. economies both seem strong. We seem to moving out of
the surprisingly mild recession.
The stock market might go up with an improving economy but it does not have
too.
P/E valuations are still high and could contract significantly.
Low interest rates support the high P/Es and this should continue.
A further major terrorist attack is always a risk and would send markets
significantly lower.
Investing in stocks with excellent fundamentals in terms of high
profitability, low P/E, low debt, and a good outlook should be a good strategy
in any market. That increasingly is my goal. I will take fewer chances on
lottery ticket type stocks.
OPPORTUNITIES
I'm sure that this market pessimism will yield some significant bargains. I
believe that the type of value analysis that I provide will uncover some of
these bargains.
Psychologically it will be extremely difficult to buy stocks at or near the
bottom of the market since, by definition, they will have been falling for a
long time. But clearly that is where the biggest opportunities will lie. This is
where a mechanical process of selecting bargain stocks will be valuable. If a
stock is truly a bargain then there is little harm if it does fall after you buy
it, since a true bargain stock will eventually rise along with its earning.
JAIL TIME
I absolutely support applying the full extent of the law against executives
that committed fraud or were grossly negligent regarding earnings reporting. I
always check executive compensation. When executives are paid multi-millions it
is a sign of greed and excess. I don't mind when executives get rich along with
shareholders, but when executives get rich by fleecing shareholders then they
need to be punished for any crimes committed.
Next Issue:
Due to vacation, I don't expect to produce the next issue of this newsletter
until late August. Meanwhile I hope to continue to update some information on
the Site. Please visit the Site periodically. Hopefully we will all have better
market results over the summer.