I agree to ShareTradingEducation's Terms of Use

US Reporting and US & ASX Market Valuations

By James Gerrish 4 Nov 2012 3:28 PM

 Today we feature this special report with our thanks to James Gerrish, Portfolio Manager at Novus Capital Ltd in Sydney which he wrote at www.mymarketview.com.au on Monday 29 October: 

 US Reporting

* The US reporting season continued last week and there are a couple of obvious themes playing out. Collectively, earnings have beaten expectations 62% of the time according to Bloomberg data which is pretty much in line with historical trends. 

* When you drill down into the composition of these earnings though, one element that we monitor closely is revenue. We put a lot emphasis on revenue because it’s a good indication of top line growth and takes out the impact of cost cutting measures - reductions in provisions and the like. 

* Revenues have only beaten expectations 37% of the time for S&P 500 companies so far, which is below the historical averages. This explains why a lot of the company CEO's in the States have been relatively downbeat even when headline earnings have actually held up pretty well. 

* That said, economic indicators in the US seem to be picking up in Q3 - the housing market is an example of this as the chart below shows - and this has helped to support an uptick in US economic growth from 1.3% to 2%. Clearly this should be a positive for US corporates and their Q4 numbers. 

* So, this prompts the obvious question of valuation; Is the market still cheap or are valuations stretched?

To continue reading, simply click on the PDF logo below.

Share:
Jim Berg and John Atkinson are Authorised Representatives (AR Nos. 322724 and 1251439) and ShareTradingEducation™.com Pty Ltd (“STE”) is a Corporate Authorised Representative (CAR No. 322726) of Longhou Capital Markets Pty Ltd, Australian Financial Services Licence AFSL 292 464. Examples from the Australian and USA markets are provided to demonstrate that Jim Berg’s principles may be used globally. This educational material is from an Australian source and complies with Australian law and not necessarily any other (local) law. Direct investing in the stock market can result in financial loss. STE products have been prepared for the general information of investors and do not take into account the investment objectives, financial situation and particular needs of any particular person. Persons intending to act on information in STE's products should seek professional advice to confirm that the investments or strategies mentioned are appropriate in the light of their particular investment needs, objectives and financial circumstances prior to taking any action. Refer also to the full Customer Caution Notice in our Terms and Conditions.