Mon, 09 Mar 2009
Troy’s Blog
Hi Troy,
I am sorry to say that the reverse is true, moving from a p/e of 2 to a forward p/e of 16 means a massive drop in earnings rather than a massive rise, all other things being equal.
This is not a surprise in the retail sector. The falling rule about 50 percent that you have applied is quite a sensible approach, there is an indicator called 'Relative Strength Indicator' that can be used to achieve a similar approach in a more scientific way.
My biggest concern would be that despite successfully buying a brand you know and understand, and you passed it through the 10 year test, I am not sure I see you performing the final check of confirming whether the share price is fair.
Cheers.
Paul
Ha ha, man I still have a lot to learn… OK so now I see what’s happening a bit clearer I’ll try to see what’s happening with the ‘Relative Strength Indicator’ Though as a Novice Investor it’s good to know that I have something in common with Barack Obama who managed to get it wrong on PE’s – see here for that: http://www.ft.com/cms/s/0/462907b0-1002-11de-a8ae-0000779fd2ac.html
Note to self, must be smarter than the president of the US.
posted at: 09:16 | path: | permanent link to this entry