Dividend Discount Model
at 2005-11-12 20:28:49
Abby Joseph Cohen was just on Bloomberg TV. She believes the stock market is cheap and will go higher, she has been right a few times so why not now?
She cited the dividend discount model (DDM) as a part of her reasoning. Beware of this type of indicator! It can make stocks look very cheap, only to get much cheaper. Ditto on stocks being overvalued. This swings versus this indicator are quite wide.
DDM does tell you if stocks are cheap or overvalued but does not offer much predictive value as to when the inefficiency will correct itself.
Where Was The Beef?
at 2005-11-12 20:28:49
Squawk Box just had a remarkably shallow segment with Bill Wilby from Oppenheimer Funds. Mr. Wilby said that the team at Oppenheimer has an annual brainstorming session to find market inefficiencies and try to isolate them for investment.
Based on the questions asked in the segment growth stocks are cheap compared to value. Stocks are cheaper than real estate. Tech looks very favorable as do all megacaps but healthcare investors should be more selective.
All the brainpower from a big company like Oppenheimer and all the crew could extract was the above three sentences. Nice work.
Did you see Senator Dorgan trying defend the windfall profit tax concept? Is he the best spokesman this movement has? I took great solace from the fact that his windfall profit tax will be different from the other one (read sarcastic tone). I did not know that he used to teach economics. I was shocked by
Surprising Email at 2005-11-12 20:28:49
I usually keep what goes on with this blog separate from what I do over at RealMoney.com but I got a surprising email worthy of writing about in response to an article I wrote about big domestic pharma.
The gist of the article was that a lot of the pharma stock as bond comparisons float around may miss the mark but perhaps some of the health ETFs could be a proxy for TIPS.
I received an email that asked why not just buy VPHM? VPHM is Viropharma. It is up 600%. I don't know enough about it to have a qualified opinion about the fundamentals.
You do not need to spend a whole lot of time studying the name to see it is a high octane stock that has a high probability of feast or famine. This type of stock has a place in a diversified portfolio. Please note I am saying this type of stock not VPHM specifically as I don't know a lot about it.
The article I mentioned above question
I Had No Idea and A Follow Up at 2005-11-12 20:28:49
Earlier today I mentioned Viropharma (VPHM), in the context of an emailer asking about as a substitute for healthcare ETF. I hope I was clear that it was no substitute for an ETF but that I knew very little about that specific stock.
Shortly after I put the post up the stock sold off quite a bit. It may be a must own (still don't know) but it is no proxy low beta anything.
Last December I wrote about avoiding obvious and tangible risk in picking a stock and I mentioned Research In Motion ( RIMM) as an example. Since then the stock is down almost 25%. I am mentioning it now because it is a great example of an important rule of thumb to keep investing simple.
Whatever it is that RIMM could have done in the last year to the upside it would
Yet More Keep It Simple at 2005-11-12 20:28:49
Yale endowment manager David Swensen was in Barron's over the weekend and for some reason he was the mid-week interview too.
I write about this a fair bit. Keeping things very simple is absolutely the best thing for a lot of do-it-yourselfers. Every so often you will find an article giving how much time is needed for different types of investors. I have no idea how valid any of those articles are, I do know it takes me about 75 hours a week to everything I need to do. You really gotta love something to spend that much time on it.
One of the bigger themes of this site is new investment products and new types of information will make investing easier for do-it-yourselfers (and professionals too, I suspect). It is important to distinguish what I mean here. Beating the market will not get easier but staying
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