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May 18, 2004 - ICLUB News
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ICLUB Insider May 18, 2004


  • 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 Acquires Official Software

    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

    For more information on the acquisition, please read the full press release at

    Updates Released for Take Stock 4 and NAIC Take Stock

    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.

    Part 5 of a Series: What Is the NAIC Stock Selection Guide All About?
    P/E Ratios and Future Price Projections
    by Ralph Seger; President, Investor Advisory Service

    (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

    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:

    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 ]       

    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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