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Twin Peaks
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A few days ago Strategy Lab posted another Question of the Week: In looking at the most widely held and most bought stocks in the Strategy Lab Open this week, we see Apple duking it out with Research In Motion - a clear case of the momentum buyers (AAPL) vs. the bargain hunters (RIMM). Which approach do you favor, and why? Give us some examples from your portfolio. Personally, I want the best of all worlds and search for a growth company with stock price rising fast but still at a bargain value. I think both AAPL and RIMM could be called "Momentum". Financially, they almost look like twins to me except that the price for RIMM (bargain) is generally up twice as much as AAPL (momentum)! Compare the following figures (mostly from finance.yahoo.com.): Supposedly representing a Bargain Stock. PEG Ratio (5 yr expected): 1.55 (lower is better) Return on Assets (ttm): 19.50% (higher is better) Stock Price Pct from 200d MA is Up 43.29%. Pct from 50d MA is Up 9.02%.
PEG Ratio (5 yr expected): 1.56 (lower is better) Return on Assets (ttm): 14.18% (higher is better) Stock Price Pct from 200d MA is Up 22.20%. Pct from 50d MA is Up 7.36%. I wouldn't have characterized either of the above as a "bargain" stock, especially not RIMM with a price-to-sales ratio of 13.19. Both do have a 5-year expected PEG Ratio under 2, which is supposed to be OK, but not under 1 which is supposed to be good. Both have a lower PEG Ratio than my stock PKX but higher than my CHL (see below). In the Value area, both have what I think is a good return on assets and return on equity, much better than PKX; however CHL is competitive. On the other hand, I'm not an expert in any of the subject industries; so don't take my word for what is a good ROA or ROE. Following are examples of my attempt at finding a growth company which also has good value and a rising stock price. POSCO (PKX) (47B mkt. cap.) PEG Ratio (5 yr expected): 1.89 (lower is better) Return on Assets (ttm): 9.33% (higher is better) Stock Price Pct from 200d MA is Up 24.43%. Pct from 50d MA is Up 7.76%.
PEG Ratio (5 yr expected): 1.00 (lower is better) Return on Assets (ttm): 14.26% (higher is better) Stock Price Pct from 200d MA is Up 32.29%. Pct from 50d MA is Up 14.65%.
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