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Chuck Carnevale
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Charles (Chuck) C. Carnevale is the creator of F.A.S.T. Graphs™. Chuck is also co-founder of an investment management firm. He has been working in the securities industry since 1970: he has been a partner with a private NYSE member firm, the President of a NASD firm, Vice President and Regional... More
My company:
F.A.S.T. Graphs™
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F.A.S.T. Graphs Research
  • Addendum To: There Is A Lot Of Value In This Market: Part 1 21 comments
    Sep 21, 2012 4:16 PM

    Introduction

    This addendum covers each of the 500 constituents of the S&P 500 index. It is meant to be reviewed and utilized in conjunction with a series of articles we are writing under the general title: There is a Lot of Value in this Market. Here is a link to our first article. Utilizing the portfolio function of the FAST Graphs™ fundamentals analyzer software tool, we have organized the S&P 500 constituents in order of highest estimated total return.

    Furthermore, we are providing the following metrics based on fundamentals that provide a quick indication of valuation. Most notably, we show the current PE ratio followed by the normal 15-year PE ratio which is the PE ratio that the market has historically, on average, applied to each of the stocks listed. Although this is statistically correct, we caution the reviewer that only by reviewing each individual company can an accurate assessment of valuation be made.

    Additionally, we caution that the estimated EPS growth rates are based on the consensus of leading analysts reporting to Standard & Poor's Corp. Capital IQ. Therefore, estimated calculations of future return are based on assigning a reasonable or sound valuation to future earnings growth based on those estimates. This may or may not be what actually occurs, however, it at least offers a reasoned point of embarkation.

    Ascertaining the Relative Valuation of the S&P 500

    One way to get a good feel for how many of the 500 S&P 500 constituents are overvalued versus fairly valued is to review the five-year estimated annual total return column (the last column on the table). We suggest that any stock that offers an estimated return in excess of the 6% to 9% long-term average of the S&P 500 could be considered fairly valued and/or undervalued at estimated rates above that average.

    However, we also caution that this analysis is based on statistical representations that may or may not unfold as presented. We believe this highlights one of the major dangers and pitfalls of relying on statistics alone. On the other hand, since this information is offered on a company-by-company basis, we believe it is superior to drawing conclusions based on aggregate averages.

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Comments (21)
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  • Dividend Growth Machine
    , contributor
    Comments (1531) | Send Message
     
    Wow, this is a ton of great information. Thanks, Chuck! I look forward to reading the articles.
    20 Sep 2012, 02:42 PM Reply Like
  • Chuck Carnevale
    , contributor
    Comments (7071) | Send Message
     
    Author’s reply » DGM,

     

    Thanks.

     

    Chuck
    21 Sep 2012, 04:17 PM Reply Like
  • Russell Lane
    , contributor
    Comments (309) | Send Message
     
    I always look forward to your articles, Chuck, but this is great information, and I'm anticipating reading the whole series. Terrific information. I'm amazed that so many great companies and great managements are undervalued.
    20 Sep 2012, 06:04 PM Reply Like
  • Chuck Carnevale
    , contributor
    Comments (7071) | Send Message
     
    Author’s reply » Russell,

     

    Thanks. One caveat, these tables are statistically produced and driven. To get a true perspective, you need to look at the individual company, either by FAST Graphs, or by doing the research.

     

    With that said, the tables offer a great and efficient starting point,IMHO.

     

    Regards,

     

    Chuck
    21 Sep 2012, 04:20 PM Reply Like
  • kolpin
    , contributor
    Comments (1166) | Send Message
     
    thanks chuck! great info.

     

    regarding historic PEs, I've often used Valueline Reports for their "median PEs" and ycharts.com for their average PE over the past 5 years for comparison, and those numbers vary a bit with some of the 15 year PEs you listed above.

     

    take CVX for example, Valueline gives it a median PE of 8.5, Ychart's average PE is 9.24, and your normal 15 yr PE is 12.8.

     

    are the differences between the historic PEs due to differing time frames, taking out the lowest/highest years, etc.? it may seem like splitting hairs, but there's enough of a difference that if I used Valueline's PE, I might hold Chevron, but not buy anymore. if I used your normal 15 yr PE, I might purchase additional shares. I'm just not sure which PE to use!

     

    thanks!
    20 Sep 2012, 10:13 PM Reply Like
  • Chuck Carnevale
    , contributor
    Comments (7071) | Send Message
     
    Author’s reply » Kolpin,

     

    You bring up an important distinction and point. Regarding FAST Graphs, the tool is dynamic because companies are dynamic. If you run 5 year FAST Graphs on the companies you mention, you will most likely get different PE calculations that are closer to your other sources.

     

    For example, the normal PE for CVX for a 5 year graph is 9.4. Two things, one we use a blended calculation throwing out the high and the low, and two, our time frame is slightly different a 5 yr. FAST Graph is calendar based so it is really 4years/ 9 mos. and 21 days currently. In other words 4 complete years and the year we are currently in.

     

    Nevertheless, the 9.4 PE is close to the 8.5 you cited (differences explianed above).

     

    Regards,

     

    Chuck
    21 Sep 2012, 04:27 PM Reply Like
  • kolpin
    , contributor
    Comments (1166) | Send Message
     
    thanks for your reply. I will take both the 5 yr and 15 yr PEs into account when deciding which stocks to buy.
    23 Sep 2012, 12:33 PM Reply Like
  • Miz Magic DiviDogs
    , contributor
    Comments (4629) | Send Message
     
    Terrific wealth of information, Chuck. Thanks for all you do!

     

    Miz
    21 Sep 2012, 06:51 AM Reply Like
  • Chuck Carnevale
    , contributor
    Comments (7071) | Send Message
     
    Author’s reply » Miz,

     

    Thanks.

     

    Chuck
    21 Sep 2012, 04:28 PM Reply Like
  • grox01
    , contributor
    Comments (734) | Send Message
     
    Hi Chuck,

     

    Wow, thank you very much for this work.

     

    Just one precision, I guess the 5 year estimate total return use in all case a p/e of 15?
    21 Sep 2012, 09:03 AM Reply Like
  • grox01
    , contributor
    Comments (734) | Send Message
     
    I think I have found my answer, which is a p/e of 15 for all but the growth stocks.
    21 Sep 2012, 10:30 AM Reply Like
  • Chuck Carnevale
    , contributor
    Comments (7071) | Send Message
     
    Author’s reply » grox01 ,

     

    Thanks. Regarding the PE 15, it is the most common. For example the 200 year average PE for the S&P 500 is 14-16 (read 15). More importantly, this represents a 6.7% earnings yield, which offers a clue to it's commonality.

     

    Fast growing stocks 15% or better will have a PEG (PE= Growth rate) and some slow growers will have PE's below 15. However, PE 15 is the most common.

     

    Regards,

     

    Chuck

     

    P.S. Here is a link to a more extensive explanation:

     

    http://bit.ly/UmOEEV
    21 Sep 2012, 04:32 PM Reply Like
  • grox01
    , contributor
    Comments (734) | Send Message
     
    I don't see JNJ in the list, it should be in the S&P500 no?
    21 Sep 2012, 07:09 PM Reply Like
  • Chuck Carnevale
    , contributor
    Comments (7071) | Send Message
     
    Author’s reply » grox01,

     

    It's there. Look to the right column for est. tot. return 11.4%. The order is by total return.

     

    Regards,

     

    Chuck
    21 Sep 2012, 09:22 PM Reply Like
  • mbn
    , contributor
    Comments (548) | Send Message
     
    WOW Chuck;

     

    I don't know how you do it. You keep raising the bar, and then smashing through it.

     

    Looking forward to this series. Could be your best yet!!
    24 Sep 2012, 08:56 AM Reply Like
  • Chuck Carnevale
    , contributor
    Comments (7071) | Send Message
     
    Author’s reply » mbn,

     

    Don't mean to offer a shameless commercial, but it's easy with FAST Graphs. This report was created by pushing one button.

     

    Thanks though,

     

    Chuck
    24 Sep 2012, 09:20 AM Reply Like
  • Be Here Now
    , contributor
    Comments (4509) | Send Message
     
    Chuck,

     

    Does the total return use FFO for REITs? I am guessing not.
    24 Sep 2012, 12:55 PM Reply Like
  • Chuck Carnevale
    , contributor
    Comments (7071) | Send Message
     
    Author’s reply » jdh44,

     

    The simple answer is yes. You can see that the dividend payout is FFO Payout %. However, performance is price per share at beginning and price per share at the end, times number of shares bought plus dividends. From this perspective, FFO or EPS etc. is not part of the calculation.

     

    I hope that is clear. Look at the top of the performance charts and see dates, shares price etc.

     

    Regards,

     

    Chuck
    24 Sep 2012, 01:09 PM Reply Like
  • Be Here Now
    , contributor
    Comments (4509) | Send Message
     
    Thanks Chuck. I see that I asked the wrong question. I know that when looking at an individual stock, I can select FFO valuation for REITs, but the portfolio report above uses PE and EPS numbers for the 4 columns following company name. In order for the tool to know to use FFO rather than EPS in this report, it would need an algorithm to automatically use that valuation method based on something like the industry code. So my question is, does this actually happen?
    24 Sep 2012, 02:41 PM Reply Like
  • Chuck Carnevale
    , contributor
    Comments (7071) | Send Message
     
    Author’s reply » jdh44,

     

    I think I understand your question, but not sure. Currently, you have to check the FFO box (actually circle) to get the payout ratio etc. on FFO. When the FFO box is checked, the column will display FFO payout percentages. However, the performance calculations will not change based on my answer above. Performance includes price changes and dividends paid, regardless of where they came from.

     

    However, our programmers are looking into an algorithm that identifies REIT's and therefore will graph accordingly. Furthermore, it is important to point out that EPS information etc. is still reported with REITs. Therefore, there is value in looking at REIT's under this metric as well.

     

    I hope this is a better answer,

     

    Chuck
    24 Sep 2012, 03:09 PM Reply Like
  • Be Here Now
    , contributor
    Comments (4509) | Send Message
     
    Thanks Chuck.
    24 Sep 2012, 04:07 PM Reply Like
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