ICLUB Insider |
March 30, 2004 |
THE LATEST NEWS ON
NAIC SOFTWARE BUILT BY ICLUBCENTRAL INC.
Summary
In response to subscriber feedback, we've recently made a
number of changes and added new features to the Investor
Advisory Service. With the April issue (published last Friday), we're pleased to offer another small, but hopefully useful, change to the publication.
In each of the three sort pages (the ranking of companies by
P/E ratio, symbol and total return), you'll now find that
issue's three newly recommended companies highlighted. This
will enable you to quickly identify new stocks in the
database and compare current recommendations to all the
other companies covered by the IAS. Just scan the pages and
look for the gray shading that signifies a new
recommendation.
If you haven't yet checked out the continually-improving
Investor Advisory Service, what are you waiting for? You can
learn more details or download a sample copy at:
http://www.iclub.com/ias/
There's no doubt about it -- NAIC Stock Analyst is one of
the most powerful tools available for NAIC-style stock
analysis. But all that power means that there are plenty of
features that users must master in order to put the software
to use. For instance, right-clicking at different places on
each form pops up various menus that allow you to set
options, change judgment items or turn on parts of the
display.
To aid you in learning about features that are available in
NAIC Stock Analyst, we've put together a two-page reference
sheet that's jam-packed with tips and tricks. Sit down in
front of your computer with this tipsheet and you'll quickly
come up to speed on most of the functions that NSA has to
offer.
What's more, it's completely free! You can download the
sheet in Adobe Acrobat format from the Investing Resources
section of ICLUB.com:
http://www.iclub.com/investing/resources.asp
One suggestion that we like comes from an NSA user who
printed out the pages and placed them in a clear page
protector (the kind that fits in a three-ring binder). Now,
whenever that user fires up the program and begins to
analyze stocks or a portfolio, the tipsheet is always handy.
To learn more about NAIC Stock Analyst, please visit:
http://www.iclub.com/nsa
(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 third 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.)
The judgment you use in estimating the future rate of growth
of earnings is a very important one. This judgment will
affect the valuation results of your SSG, including Relative
Value, US/DS ratio and potential Total Return. A number of
factors must be taken into consideration in making a
judgment on a company's expected future rate of growth.
Is it sustainable? Look at recent years performance, as
well as Value Line's "Retained to Common Equity" (the
sustainable growth rate).
Look at the growth rate of total annual sales or
revenue. It is more reasonable to expect geometric growth
from a small or moderate base than from a large base of a
mature company. A sapling will easily grow into a large tree
if nourished, and a child will grow into an adult. However,
the growth of a larger tree is not as dramatic as a sapling,
and the growth of an 18-year-old does not match the rate of
growth of a pre-teenager.
In the long run, it is difficult to expect internal
growth of EPS to exceed the rate of growth of sales or
revenue. Bottom line growth (EPS) comes from top line growth
(sales or revenue). The rate of growth of EPS can exceed the
growth of sales on revenue under certain conditions:
The pre-tax profit margin rises. However, is this
sustainable?
The number of shares is reduced by buybacks. Is
this sustainable?
Acquisitions are made, and the P/E ratio of the
acquiring company is greater than the one acquired.
This tends to boost EPS growth. How long can this
be maintained?
The tax rate goes down. Is this sustainable?
Non-recurring factors boost profits. Is this
sustainable? It is wise to exclude non-operating
revenue and profits from the record of actual vs.
expected results because they are temporary. Use
PERT to make a judgment as to what to include as
sustainable operating results and what may be
non-operating results. The same applies to
expenses.
For retail companies, it is important to consider same-store
or comparable store sales growth. This is the internal
growth that comes from management's efficiencies, not from
adding more retail outlets.
Look carefully at reported top line growth. How much is
internal, derived from existing operations, and how much is
from acquisitions? Remember, it is internal growth that is
important to sustainable operations.
Finally, be wary of companies which try to dress-up results
with "pro-forma" or "one-time" accounting, or of companies that
employ accounting principles that vary from GAAP (Generally
Accepted Accounting Principles). Such practices may be used to
shed a favorable light on results that GAAP would suggest are
unacceptable.
To be continued....
For more information on the Investor Advisory Service, please visit http://www.iclub.com/ias/.
NAIC's new Take Stock software makes it very, very easy to
learn and apply NAIC's time-tested stock-picking techniques.
It's simple enough for a beginner to get started immediately
and convenient enough to help even advanced investors get a
quick read on a stock.
Most of us know someone -- a granddaughter, nephew,
neighbor, father, or friend -- whom we wish was more savvy
about investing. The perfect gift for that person is NAIC
Take Stock, a great first step on the path of financial
independence. For more details, please call NAIC at 1-877-
275-6242, ext 0, or visit:
http://www.iclub.com/takestock.
Representatives from ICLUBcentral regularly travel to NAIC
chapter events across the country. Here's your chance to ask
us questions in person, gain valuable investment insight and
see our software products in action. Here are a few of the
upcoming events at which you'll find ICLUBcentral
represented:
Central Ohio Investors Fair
Doug Gerlach
Columbus, OH
Saturday, April 3rd, 2004
Massachusetts Chapter NAIC Stock Analyst Computer Lab
Rich Beaubien
Haverhill, MA
April 10, 2004
Yankee Chapter Annual Meeting
Rich Beaubien
Old Saybrook, CT
April 13, 2004
Minneapolis/St. Paul Investors Fair
Rich Beaubien
Brooklyn Center, MN
April 23-24, 2004
Massachusetts Investor Education Fair
Rich Beaubien
Needham, MA
April 30 & May 1, 2004
Maine Investor Computer Education Day
Rich Beaubien
Bangor, ME
Saturday, May 8, 2004
If your chapter would like more information on the
ICLUBcentral Speakers Bureau, please contact Doug Gerlach,
VP of NAIC Products, at
and we'll do our
best to arrange a speaker for your event.
Read past newsletters, subscribe, or unsubscribe at:
http://www.iclub.com/newsletters/
Copyright 2004 ICLUBcentral Inc. All rights reserved.
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