Monday, February 11, 2008

What Are the Sell Side Analysts Smoking?

excerpts from this week's report:

"The gap between what sell side analysts are forecasting for 2008 and what the market is estimating (based on current market values) is wide and gets wider with each passing day. Standing at a whopping 30% (rough average of $102 versus $72 S&P 500 operating earnings), one would assume, of course, that sell side analyst estimates will start their descent to reality once..."

"Consider the table of earnings estimates for the large, mid, and small cap of the S&P 1500 on the following page (see report)..."

Investment Strategy Implications

"It is hard to argue with the top down estimates of a flat to slightly down earnings year ahead. It is easier to argue against the dire forecasts of a plunge in earnings that the current market valuation levels strongly suggest. And it is very easy to argue against, even dismiss, the cumulative earnings numbers being put out by sell side analysts..."

"It therefore seems logical to conclude that somewhere between the optimistic dream world of the sell side analyst forecasts and the hellish prediction of the bears (as expressed by the current valuation levels of the market) lies the highest probability of earnings for 2008 and, thereby, where the market might end up.

With that in mind, here is (see report) a rough top down, worse case probability estimate of the S&P 500 operating earnings for 2008..."

also in this week's report:

* Expected Return Valuation Model
* Moving Averages Scorecard
* Model Growth Portfolio
* Sectors and Styles Market Monitor
* Key US Economic Indicators

*To gain access to this week's report (and all reports), click on the subscription information link to your left.

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