Wednesday, September 06, 2017 9:46:37 AM
Hi Allen, Re: Value Line's "Appreciation Potential".............
I see Toof already replied to you. Each week Value Line publishes a new group of stocks in their 1700 stock survey, a new Summary and Index section along with their Selection and Opinion information. Through long habit, I have collected data from these various publications as well as from Barron's. This is what the lead page of VL's Summary and Index looks like:
On the lower Right you'll see their "Estimated Median Price Appreciation Potential of all 1700 stocks in the Value Line universe in the hypothesized economic environment 3 to 5 years hence."
Note that at the market low it showed a 3-5 year potential of +185% where today it's just 40%. Historically 35% to 40% is a very low level of appreciation potential.
The median value of the AP is 60% since 1982 with a standard deviation of about 28. Average value is 66%. So, anything above 88% AP is quite bullish compared to the median value while 32% would be bearish. We've been hovering at ~35% for a very long time (threshold bearish). We need to remember that the AP moves in 5% increments, so practically, 35% is the bearish threshold while above 85% would be bullish. The extreme values are 25% (01/27/2014) and 220% (03/29/1982).
Looking at our v-Wave data, our median value = 54.4, our standard deviation is 8.9 and our average value is 52.5. So, above 63 would be considered bearish while 45.5 and below would be bullish. The extremes are 4.38% suggested cash up to 65.36% suggested cash (same dates as the AP extremes).
We need to remember also that the Appreciation Potential values are forward looking 3-5 years. So they're telling us that there's not much upside potential from here through 2020 to 2022. With very lofty P/Es I can understand their opinion. Our v-Wave attempts to invert the potential upside value into potential downside risk and how much cash one should hold for that potential risk. During more normal interest rate times, holding extreme levels of cash was not as harmful as it has been in recent years.
I see Toof already replied to you. Each week Value Line publishes a new group of stocks in their 1700 stock survey, a new Summary and Index section along with their Selection and Opinion information. Through long habit, I have collected data from these various publications as well as from Barron's. This is what the lead page of VL's Summary and Index looks like:
On the lower Right you'll see their "Estimated Median Price Appreciation Potential of all 1700 stocks in the Value Line universe in the hypothesized economic environment 3 to 5 years hence."
Note that at the market low it showed a 3-5 year potential of +185% where today it's just 40%. Historically 35% to 40% is a very low level of appreciation potential.
The median value of the AP is 60% since 1982 with a standard deviation of about 28. Average value is 66%. So, anything above 88% AP is quite bullish compared to the median value while 32% would be bearish. We've been hovering at ~35% for a very long time (threshold bearish). We need to remember that the AP moves in 5% increments, so practically, 35% is the bearish threshold while above 85% would be bullish. The extreme values are 25% (01/27/2014) and 220% (03/29/1982).
Looking at our v-Wave data, our median value = 54.4, our standard deviation is 8.9 and our average value is 52.5. So, above 63 would be considered bearish while 45.5 and below would be bullish. The extremes are 4.38% suggested cash up to 65.36% suggested cash (same dates as the AP extremes).
We need to remember also that the Appreciation Potential values are forward looking 3-5 years. So they're telling us that there's not much upside potential from here through 2020 to 2022. With very lofty P/Es I can understand their opinion. Our v-Wave attempts to invert the potential upside value into potential downside risk and how much cash one should hold for that potential risk. During more normal interest rate times, holding extreme levels of cash was not as harmful as it has been in recent years.
Best regards,
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