Posts made in June, 2008
The P/E Ratio Part 3
Continuing from The P/E Ratio Part 1 and The P/E Ratio Part 2… So far we been using some unlikely assumptions, namely that this fictitious company we are going to buy has a constant earnings stream and that there is no risk involved in that earnings stream. Of course the real world is quite different! Let’s next decide on how a changing earnings stream can affect the present value of all those future annual earnings. The Math is Not Much Different The math is not really different, we just have to take an extra step. Before, we were just assuming that a company would produce $1 in annual earnings forever. But let’s now pretend that our company is...
Read MoreThe P/E Ratio Part 2
If you recall from Part 1, I mentioned that one way of looking at the P/E ratio is to consider it as the price today of purchasing a $1 income stream for life. When people bid up a stock, and hence the P/E ratio, they are basically saying that they believe that company’s future earnings outlook are more promising, and are willing to pay more to own a piece of those future earnings. So What’s A Fair Price For A Company? Let’s assume we have a company that is guaranteed to provide $1 per year for life no matter what (i.e. there is no business risk whatsoever – purely wishful thinking!). In this case, what would be a fair price to purchase that...
Read MoreA Lap Of The Blogs
If you are a daily reader, you will know that I’ve been experimenting with some alternative delivery methods, such as the video entry on private equity and the video tutorial on looking up a stock quote. Well, starting soon I’m also going to start pod-casting. Look for an iTunes podcast feed to launch (as soon as I figure it out). This will allow people to download the feeds and listen to them on the way to work on their iPods (I think). :) From Around The Blogosphere Jonathan Chevreau talks to Norm Rothery about how $10 trade commissions present some interesting portfolio options. The Quest For Four Pillars explains how anyone can probably create an extra...
Read MoreThe P/E Ratio
During yesterday’s Video Tutorial on How To Read a Stock Quote, one of the items pointed out was the P/E Ratio. I purposely skipped over giving an explanation as it would’ve taken the 10 minute tutorial to about 20 minutes! However, today I will follow up on that promise to explain it in more detail. The P/E Ratio, also known as… The P/E Ratio is such a widely used ratio that it has many different slang terms such as: 1. The Multiple 2. The Price to Earnings Ratio 3. The P/E Ratio 4. Earnings Ratio 5. Price Multiple …and there are probably some others that aren’t top of mind right now, too. Okay, so what is it? The price to earnings ratio is...
Read MoreHow To Read A Basic Stock Quote
I think I’ve made the mistake of not putting enough “foundation knowledge” posts on this blog (and perhaps not appealing to a larger audience), so you’ve probably noticed that I’ve been experimenting with topics that have more mass appeal – like the posts on Price Vigilantes and Market Mavens for example. Along that vein, I decided to not only change the look of the blog, but also to change up the content slightly. I’m still going to post technical articles (such as the reverse dispersion equity collar), but I’m also going to include video blog entries (like the one on private equity) and starting today: Video Tutorials! So...
Read MoreThe Storm Before The Storm (As opposed to the calm)
In reference to the old adage, “the calm before the storm” – the stock markets tend to have good storms right after the bad storms. By this I mean that equity markets have a tendency to rebound fairly strongly after adverse market conditions. Unfortunately, many investors bail out of their investment portfolio strategies during the bad storms and forego the market appreciation while watching from the sidelines. Of course, it can be very difficult watching your portfolio see-sawing back and forth so I thought I would ask Russell Investments for permission to post a fantastic chart they have that might help you “batten down the hatches” and...
Read MoreGroceries At Eye Level Cost More
Have you ever noticed that your local grocery store has all the milk and eggs at the very opposite end of the store as the entrance? This may be because you will have to walk by more items before grabbing the ones you want, which means you are more likely to buy more. Product manufacturers can also pay grocery stores to place their items on the middle shelves since people spend more time looking at items placed at eye-level, and hence are more likely to purchase them. In aisles with products that may appeal to children, these items may be placed at their eye-level, i.e. on the lower shelves. It would seem that supermarkets have spent lots of money on hiring psychologists...
Read MoreFollow Preet for free
2729+ followers on Twitter
1489+ Email suscribers
492+ Facebook fans
2902+ RSS feed readers
Recent Comments