| ICLUB Insider |
May 18, 2004 |
THE LATEST NEWS ON
NAIC SOFTWARE BUILT BY ICLUBCENTRAL INC.
Summary
ICLUBcentral Acquires Official Software, LLC
Updates Released for Take Stock 4 and NAIC Take Stock
Ralph Seger: P/E Ratios & Price Projections (Part 5 of a Series)
Product Buzz: Updates on Our NAIC Software Products
ICLUBcentral Inc. recently announced the acquisition of
Official Software, LLC, the leader in software for filing
federal copyright and trademark registrations. The award-
winning Official Copyright software makes protecting the
intellectual property you create very simple, with a unique
step-by-step interview, tools to save, track and manage
filings, and much more!
To celebrate ICLUBcentral's acquisition of Official, we
are offering a great discount on the copyright software
to our NAIC customers: software to help you with an
unlimited number of filings, which retails for $149, is
available to you for only $99. To take advantage of this
offer, please visit http://www.officialsoftware.com/portal/products-oswc.asp
For more information on the acquisition, please read the
full press release at http://www.iclubcentral.com/corporate/press/article.asp?name=p_20040426
In response to customer feedback and the discovery of a
couple data issue, we recently released updates to our Take
Stock investing software products. The new version of
InvestWare Take $tock 4 is build 4.0.14 and the new version
of NAIC Take Stock is build 4.0.1.
To update your software, simply launch Take Stock and type
any ticker symbol or company name into the Ticker or Company
Name boxes on the Take Stock main page. When the price
and/or other information shows that the update has taken
place, simply exit the program and then launch it again.
The update will be downloaded and installed.
If you're using the Advanced mode (which you can access
via Preferences), then to update your library of stocks to
the new data, open the Maintenance screen. Click on the
"Select All" button at the upper left and then click the
"Update" button at the bottom. Take $tock will go through
your stock library and replace each file with the new data.
(Editor's Note: NAIC's Stock Selection Guide is the
cornerstone of the "Investor Advisory Service," and is used
by Ralph Seger and the analysts at Seger-Elvekrog to select
and follow each company included in the newsletter. In this
issue, we are pleased to offer the fourth of a multi-part
series of tips that delve into the basics of the SSG and how
it can best be used to identify stocks for your portfolio.)
If we accept the premise that there should be a reasonable
relationship between expected future growth of EPS and the
P/E ratio, we can use similar logic to assist our decision
process. The logic is the P/E ratio as a percent of the P/E
ratio, or PEG for short. If we can buy a stock at a PEG ratio
of up to 100 or 110, then history tells us that is reasonable.
Of course, in calculating the P/E ratio, we must use analysts'
estimated EPS 12 months in the future. If the PEG ratio looks
too invitingly low such as 50 or 60, then probably someone
knows something we don't know, and that "something" is not
good. One way to make money is to avoid losing it by paying
inflated values for stocks.
It follows that if a high P/E ratio is chosen to calculate
the future high price that incorporates an unreasonably
generous PEG ratio, the probabilities for disappointing
investment performance greatly increases. It is also evident
that the PEG ratio is a function of the estimated growth rate
and estimated EPS 12 months in the future. The good record of
the Investor Advisory Service (IAS) in outperforming the S&P
500 is a function of recommending buys at reasonable PEG
ratios for well-managed growth companies. The PEG ratio is
a function not employed in the official NAIC SSG. Nevertheless,
it is a concept of Stock Selection Theory that is important.
Why? It is important because it relates proposed future P/E
ratios to be used for valuation purposes to a reality other
than sky-high P/E ratios that speculators have paid during
irrational exuberance periods. PEG is a simple concept, but it
requires good judgment. It requires that the investor
realistically estimate the future growth rate. This does not
mean either conservatively or optimistically, but
realistically using the best tools and experience available.
This is an element of Stock Selection Theory; that is really
understanding the interaction of elements that affect
valuation of stocks.
Relative Value, by definition is the forward P/E ratio as a
percent of your judgment as to what is an appropriate future
average P/E ratio. Forward P/E uses the current price and
the analysts' estimate of EPS 12 months in the future. Aside
from investor's psychology, there are two prime factors that
determine the future price of a stock. These are EPS and P/E
ratio. The future high price is a multiple of future EPS and
a future P/E ratio. The SSG arrives at the estimate of the
future high price by multiplying the estimated selected high
P/E ratio by the estimate of EPS five years in the future.
Of these two factors, expansion of the P/E ratio from close
to the average or less towards the average high P/E ratio is
the most powerful. Price appreciation results from a
combination of EPS growth and P/E ratio expansion.
When estimating what P/E ratios to use in section 4-A, to
calculate the potential high price and 4-B (a) to estimate
the potential future low price, it is important to use the
above logic. The Toolkit software, as currently formatted,
uses P/E ratios from section 3 lines 7 and 8 for the PERT
Report. If these differ from the user's judgment for
section 4-A and 4-B (a), then manual calculation must be
made in the PERT Report. If Relative Value (RV) is not
calculated on the basis of your judgment as to what is
appropriate for sections 4-A and 4-B (a), the result will
be misleading. A manual calculation must be made as to the
average future P/E ratio and used to calculate the RV.
It follows as night follows the day that the lower the
opportunity for a P/E ratio expansion, the lower the
opportunity for a price rise. If you can buy a stock at a
P/E ratio at or somewhat below your judgment as to what is
an appropriate average P/E ratio, the odds for a significant
price appreciation increase. A Relative Value (RV) of 100
says the current P/E ratio is equal to your judgment made
as to the future average P/E ratio. If the RV is
significantly less that 100 it may indicate that the
profitability of the estimated EPS 12 months in the future
may be at risk. In other words, the P/E ratio is depressed
because of investors' apprehension that estimated EPS will
not be achieved. Someone knows something you do not know
and it is not good news. This is known as discounting the
future. When the P/E ratio is excessively high, the future
good news is already discounted in the price. When the P/E
ratio drops to a value that is much less than the judgment
of the average low P/E ratio, it suggests there is a reason
for this supposedly great bargain. The "bargain" may turn
out to be a trap for the unwary and inexperienced. Remember,
there is no such thing as a free lunch. If it looks too
good to be true, it probably is not true.
To be continued....
For more information on the Investor Advisory Service,
please visit http://www.iclub.com/ias/.
Product Buzz: Updates on our NAIC Software Products
Is your computer fitted out with the latest and greatest NAIC software? Here's an overview of the programs currently offered by ICLUBcentral:
INVESTING SOFTWARE
NAIC Classic (Plus)....................................Current Version: 2.1.0043
[ Order ]
[ Info ]
[ Download demo ]
NAIC Investor’s Toolkit (Pro).........................Current Version: 4.0.18
[ Order ]
[ Info ]
[ Download demo ]
[ Updates ]
NAIC Take Stock............................................Current Version: 4.0.1
[ Order ]
[ Info ]
[ Download demo ]
NAIC Stock Analyst....................................Current Version: 3.0.0001
[ Order ]
[ Info ]
[ Download demo ]
[ Updates ]
NAIC Stock Prospector...............................Current Version: 2.5.0037
[ Order ]
[ Info ]
[ Download demo ]
TAX & ACCOUNTING SOFTWARE
NAIC Club Accounting..................................Current Version: 2.5.11
[ Order ]
[ Info ]
[ Download 2.3.5 demo ]
[ Updates ]
NAIC Online Club Accounting................................Always Current!!
[ Order ]
[ Info ]
[ Demo website ]
2003 NAIC Club Tax Printer.......................Current Version: 1.0.0020
[ Order ]
[ Info ]
[ Download ]
2003 NAIC State Tax Printer.......................Current Version: 1.0.0017
[ Order ]
[ Info ]
[ Download ]
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Copyright 2004 ICLUBcentral Inc. All rights reserved.
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