I've just taken a terrific ride around the world, back in time and forward to the future. I've studied the methods of Mesopotamian iron smelters, observed Italian craftsman manufacturing multi-coloured mosaics in glass, stood behind Henry Ford and then Eiji Toyada as they revolutionised the auto industry, and surveyed a planet-wide manufacturing network, or value chain, that is more complex and beautiful in its own way than I could have imagined.
If you take today's share price and divide it by one year of earnings per share taken from a company's results six or more years ago it will, in general, be a more powerful predictor of future stock market returns than using this year's earnings.
That remarkable fact reminds me how many investors take the price earnings ratio for granted. Almost all of us use it but how many have really scrutinised it? Few have built their career around the PE, but Dr Keith Anderson, a finance lecturer at the University of York, has.
Next up… CPL Looking at my screens this month it felt like I’d developed tunnel vision. All I could see were companies I’d included in the Thrifty 30 portfolio, or companies I’d rejected. There must be more, surely…
Mined that seam Screens throw up opportunities, but mine are becoming clogged with companies that I’ve rejected and companies that I’ve added to the Thrifty 30 portfolio so from this month I’m striking those companies out with a coloured bar: green for additions, red for rejects.
The full range of value I’m starting the month looking at Bloomsbury and Smith and Nephew, two companies at opposite ends of the value spectrum. Publisher Bloomsbury appears in my Bargain and Thrifty lists:
Caught some tiddlers, throwing some back… Last month I included in the Nifty and Thrifty screens companies that reported their latest full year results more than four months before screening. Although the restriction I’d applied before then, including only companies that had reported recently, ensured results were up to date and guaranteed the screens compared companies reporting over similar periods, they were just too restrictive at this time of year, when few companies are reporting. This month I've freed the Bargain Screen as well:
Days of crisis The first and second working days of the month are days of crisis for me, regardless of the state of the market. I spend them opening and closing spreadsheets, copying and pasting data and inserting it into articles I write for Money Observer, and producing performance tables and charts.