The vital element in the making of decisions is described as perspective.
Perspective was also the name of the institutional service on which Arthur Lipper Corporation, my first New York Stock Exchange member firm was based upon. The Perspective service took the form of a printed book showing the relative value of 10 years of per share earnings, price/earning ratio, share price and dividend yield of more than 300 publicly trading companies, relative to (or as a percentage of) the same values for the Dow Jones Industrial Average (DJIA).
If the per share earnings growth of a stock was higher than the growth of earnings for the DJIA the quarterly plotted line sloped upwards. Similar relative calculations were made and plotted for each of the other 3 ratios.
Current technology has improved the available data and I wish to create Perspective II, which will be both digital and allow the relative comparing of any two of the stocks for which there is available data, not just showing an individual stock relative to the DJIA or another average or index.
Perspective II will graphically display the relative; EPS, P/E/ Price and Yield on the vertical Y axis, using the horizontal X axis, on the bottom of the 4-line charts for the years.
The relative EPS chart will show the comparative record of reported per share earnings. One of the two companies is likely to have outperformed the other. The observation can also in all cases be made versus a stock market index or average.
The relative Price/Earnings/Ratio indicates investor expectations for per share earnings growth. The higher the relative P/E is the greater will be investor disappointment if reported per share earnings are less than is generally anticipated.
The relative price of a stock reflects the impact of reported per share earnings and as compounded by the level of relative P/S. The P/E of stocks’ of companies primarily in cyclical industries tend to discount good per share earnings and increase in the case of disappointing per share earnings, recognizing the traditional cyclicality of the industry and company. In the case of growth companies, many of which are in service industries, the relative P/E will likely compound the trend of relative per share earnings.
The relative dividend yield level and trend simply indicate investor historic returns. Investment in high yielding stocks can be both rewarding and subject to downward share price adjustment if the dividend and therefore yield lessens.
Eventually, I wish to license one or more of the big services: Bloomberg, Schwab, Yahoo, etc. to recreate a Perspective II, as they already have the data. The difference is that they now could compare any two companies, rather than just comparing the stocks to the same factors in market measures.
That which can now be done is for an investor to simply identify two stocks, or a single stock and a market measure and a Perspective II licensee will be able to instantly generate a 4-line chart showing the relationship between the stocks interesting the client.
Arthur Lipper, Chairman
British Far East Holdings Ltd.
14911 Caminito Ladera,
Del Mar, CA 92014
+1 858 793 7100
arthurlipper@gmail.com
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