Re: The Simple approach to predicting future stock market returns
TLK, this thread was about the S&P 500 Index - which a person can buy through index funds. This exercise allows us to project a range of future returns based on what is know (dividend yield, p to e ratio) and an estimated earnings growth rate (which can be obtained by looking at historical growth rate.) Her 4.5 pct growth is assumed.
One can do a similar analysis for individual stocks to get an initial estimate for future results. But balance sheet becomes very important. Also, goodwill, intangibkes, cash flow (free and operating), pension liabilities, become important. So I would be careful using this simple approach for individual stocks.
Based on valuatuon, big oil stocks were very cheap a week ago. Last week they did jump circa 7 pct.
BP TOT RDS-A COP CVX XOM are some names in big oil.
Caterpillar at 64 was quite cheap. It jumped last week to 69.
I am waiting for a pullback in these shares. If that doesn’t happen I won’t buy. If it does, will buy little at a time.
Wal mart was also cheap a week ago. Rebounded a bit.
IBM also was cheap. Must have gone up last week.