Mar 6, 2015
The question for today is about valuation in the market. There are definitely some industries where I believe prices have gotten out of hand. In recent blogs I pointed out a few.
It’s time to do some homework.
Pharmaceuticals and Biotech include stocks that must be watched closely. The fundamental data is flashing BEWARE.
Here is a list to review:
http://finviz.com/screener.ashx?v=161&t=PFE,NVS,BMY,ABBV,AZN,LLY,CELG,BIIB,AMGN
Looking at PE, P/FCF, P/B and even Fwd PE, the numbers remind me of the Dow 30 in Q4 2000, right at the top of that market cycle – the one where GE was trading at a 60 PE – now long before the equity market crashed.
There are some industries, as I have been pointing out, that have room to grow on the upside. Moreover, I began to opine early in 4Q14 that the equity market had about a year remaining in what was already a long-in-the-tooth Bull.
More recently I have been warning of a rolling top – one where some industries get a pop and then pull back, then pop again and then pull back. That is, until the whole market pulls back and begins to crash.
This is a time of pump and dump, a time when IPO stories abound.
The promoters may be institutional investors or broker-dealers. These are the players who usher their spokespeople onto Financial Entertainment Television, possibly unwittingly, painting lipstick on their pigs. I say ‘unwittingly’ in many cases because these talking heads tend to favor a high level of income to one of unemployment and hence are prone to lapses of common sense.
Have you ever wonder why it is that many of the Chief Market Strategists of some of the biggest names on Wall Street so frequently undergo wash, rinse and repeat. Here today, gone tomorrow. Soon to be there or there or there.
I recall back at the top of the 1999-2000 cycle peak when one well-known market commentator on CNBC, I think, gave me one of those jaw dropping moments when he opined that GE at a PE of 60 was actually under-priced. The fact that GE owned the network did not seem to disturb the on-air personalities at the time. They were even bragging that GE was a solid holding in their pension accounts.
That’s why I refer to these financial networks as Entertainment Television.
Independence and objectivity? I don’t think so.
As you know, some of my opinions are not spot on. You need to be doing your own homework. These links at 4-Traders.com might be helpful.
http://www.4-traders.com/PFIZER-INC-4821/
http://www.4-traders.com/NOVARTIS-AG-13838/
http://www.4-traders.com/BRISTOL-MYERS-SQUIBB-CO-11877/
http://www.4-traders.com/ABBVIE-INC-12136589/
http://www.4-traders.com/ASTRAZENECA-PLC-11745/
http://www.4-traders.com/ELI-LILLY-AND-CO-13401/
http://www.4-traders.com/CELGENE-CORPORATION-8736/
http://www.4-traders.com/BIOGEN-IDEC-INC-4853/
http://www.4-traders.com/AMGEN-INC-4847/
It seems that Bristol-Myers (BMY) is ok in their books – and I like 4-Traders.com. But I just cannot get my head around BMY’s 55 PE and the Fwd PE of 29. Looking ahead a couple years, even the 4-Traders.com analysts are buying into the story that earnings will be explosive.
Pump, pump, pump…
Maybe that inflated tire will keep you rolling up hill.
What is trending higher today is my impatience with the IT team. Now they have promised, once again, to have our mailing list problems fixed over the weekend.
We shall see.
Until tomorrow…
/Bill