Nifty PE crosses 24|A statistically informed entry-exit model!


(GreyCells) #1315

Good data points. How to interpret it?

McLallen Oscillator is down after certain level then its bad period? As you marked it in 2007-2008 by the red line. We are already below that level.

Also if you could update the current data then it would be good

Thanks
GreyCells


(Growth_without Debt) #1316

(GreyCells) #1317

I tried to compute the McLallen Oscillator Summation index … my chart is different than yours

image

Could you please provide the detail steps?


#1318

Even great companies fall, if valuations are expensive and sales growth concerns arise. A trillion dollar company is getting hammered.


(Changu Mangu) #1319

@homemaker This is why reading news articles written by reporters and not investors is injurious to one’s financial health.

The company is not getting hammered. The stock price is getting hammered.

Here is a small message I sent to someone, you can read it, just slightly dated so you will have to update the current cash:

Apple has 243 Billion in Cash.
Total Shares Outstanding are: 4927 Million (Compared to 6552 Million Shares in 2011, reflecting the reduction by buyback of shares and after issue of new shares to executives)
So Cash is 50 USD Per Share. When you remove that then the price that remains is for future growth. Even at 7-8 percent growth per year, it is a screaming buy if it comes to around 150.

If you look at the earnings they are around 12 USD per share, remove 50 USD of cash and put a multiple on the balance. Then compare the price of Apple to the prices of even Indian small caps. Which business would you rather own?

Avoid news articles, spend time assessing businesses.

Best regards.


(Amit Jain) #1320

Either that or the companies is India are currently expensive as per global standards.


(Changu Mangu) #1321

They are expensive even by Indian standards :stuck_out_tongue:


#1322

Don’t want to hijack the thread with apple valuation but can’t resist. Current cash per share is 60…285 bn. So current share price minus current cash is 180-60=120. With 12 as EPS that’s around 10 PE. Am I right?

Seems cheap by this back of the hand method… He he!!


(Changu Mangu) #1323

Perfect. Spot on. Best Regards.


(Amit Jain) #1324

Americans say that the market doubts that Apple has lost its ability to innovate.


(Vijayk) #1325

There are many Indian small caps that would be able to grow earnings at 25% for next decade on an average and become 10x. In last 10 or 20 years, many Indian stocks have become 10-100x. They were small caps to start with.
However, Apple has almost a zero chance of becoming even a 3x in 10 years.
Even 2x has low probability.
Our HDFC bank should beat Apple hands down over next 10 years even though it is thrice more expensive.

At one time Nokia and Blackberry used to dominate cell phone markets. Today it is Apple. The above two firms are almost bankrupt.
Almost everyone used to have a Nokia phone once. And all business guys used to have blackberry. There was no 2nd choice other than blackberry for business guys.

Apple is a sitting duck out there. Google and Amazon are 2 credible threats to Apple.
Google can become big in hardware with own laptops and new operating system which may be better than Apple. Who knows? All this is theory. But the the threat is a pretty credible. And when that happens in tech industry, the previous leaders practically go to zero.

I would rather own Indian small caps.


(James Sebastian) #1326

What are quality names in midcap and smallcap space which you think has potential to become 10x in next 10 years ?


(Changu Mangu) #1327

Dear @Vijayk

Please take my disclaimer: Buddy, whatever I type below is not personal. I am only typing to answer to you and hopefully it will be something that will help you or me. Second, You made the effort to make a good post on your thoughts, so I will make this one post to reply. No further communication back and forth. My intent is only kind, but my words are clear, so they will sound harsh, I request for an apology from you in advance. Also, I am a novice, so I don’t know anything.

I am also aware that in some way this post links to the high prices in the Indian stock market, so I think it is fair play to discuss the below since it is not so much about what will happen but about investor phycology which is what leads to high price multiples and whatever else.

Sir, I am sure of the above. I am not sure which stocks will be able to do that. If you know please proceed to buy or hold them. Please also make a new thread and post those stocks and your rationale. Your conviction is yours. Personally, I want things great businesses fairly valued bordering on cheap when I buy them because I am not a genius who can predict 10 years of growth. I can not even accurately predict my company’s sales for the next month, forget next one year, so knowing my very limited knowledge, I will not be able to pay up a high price for growth. I fail in front of your awesome skills.

Sir, this is called prediction. as far as I am concerned then one can also read tarot cards or ask a parrot to come out of a cage and say the same. How do you know sir? Even Mr Puri or Mr Cook will not take such a bet. Your confidence is admirable. Hat’s off.

Sir, this part is called first level thinking. If you know this, and we all know this, then are the people at Apple utter fools? Is the CEO of apple is a chicken who is on the path of known and doomed destruction? Please apply second level thinking.

And this is the part where this fits in nicely with the high prices being paid for mediocre and very average enterprises and the overvaluation we discuss on this thread. I know for a fact when I read all these confident comments that the bear market is still collecting students to teach them a very bitter lesson. You will get your due share if you don’t open your eyes.

Mate, I am only trying to jolt you. So you please think through that you have not only a high level of confidence of 25% CAGR but extremely high overconfidence where you will beat Buffet and many others like him in returns and that too over a long period 10 years. You know not what you are trying to achieve. That road is littered with scary stuff. We fear to tread… where you know who marches on bravely. Yes there are exceptions, and many are on VP, but they are outliers who know they got damn lucky. So if Lady Luck wishes to bless you, I will be very happy for you.

Please I apologize and only hope it will just give you a little to ponder over if you are open to your thesis being challenged. But if you already know everything about the future, then I may have not added any value.

Good wishes my friend.


(Amit Jain) #1328

Pursuing quality regardless of price is, in my opinion, one of the riskiest - rather than the safest - of investment approaches. Highly respected companies invariably fall to earth. When investors’ hopes are dashed, the impact on price is severe. For example, if a high p/e ratio is attached to earnings that are expected to grow rapidly, an earnings shortfall will cause the p/e ratio to be reduced, bringing about a double-barreled price decline.

Certainly not me… Somebody famous. :slight_smile:

Eagerly waiting, and waiting… for the gems to lie in the rough.


#1329

Are you investing in reasonably valued blue chips like Infy, ITC , Mahindra , or you are waiting for 2008 like valuations


(Amit Jain) #1330

It is tough to say what is reasonably valued. Everything appears to be a trap, esp Index scrips at Nifty PE 26.


#1331

But you will need to have valuation for stocks in mind unless you want to invest in index. Infy was 10 forward PE adjusted for cash when index was at 25


(Amit Jain) #1332

IMO, Nifty PE reflects the overall exuberance, the sentiment of the entire investment community. I suppose, when the sentiment softens we will really know how cheap the companies get.

At that time, when Nifty PE is around 17, it wont be much of a bother to buy good companies even at slightly expensive valuations.


(Growth_without Debt) #1333

Sometimes, that’s why it is hard to beat index fund investment -because bad companies out and good companies in (automatic churning which sometimes difficult to follow)

Poor quality out - Vakrangee, PC Jewellery, 8K miles, Kwolity, etc.


(Amit Jain) #1334

Why wait for the authorities to oust a scrip from the index, when the retail investor himself can take the call. Few years of experience doing this should be a worthwhile skill for ones personal finance.