HOW TO USE THE NEW INVESTMENT FIGURES PAGE
It's a steamy stock market out there, rife with opportunity--and danger. That's why we have revamped our Investment Figures of the Week (page 189) to give investors new tools to monitor the markets and manage their money.
One new feature is Bloomberg Money Flow Analysis, a system that tracks every trade of less than 10,000 shares in exchange-listed and over-the-counter stocks. The object of this analysis is to find stocks whose price performance is weak but whose shares are being snapped up nonetheless. Those stocks can make good buys, since often the price will turn and follow the money. Conversely, stocks with positive price performance but negative money flows may be headed south.
The screen works like this: Suppose 1,000 shares of a $25 stock trade up 1/4 (25 cents), and on the next trade, 200 shares sell down 1/4, and on the third trade, 200 shares change hands as the stock falls another 1/4. For the three trades, the shares are down 1/4, but more money has flowed into the stock ($25,250) than out ($9,950) for a net inflow of $15,300. If this pattern is repeated over the span of a month, the net inflow can run into the millions. The greater the inflow, the more likely it is to appear on our weekly list.
Earnings are an important driver of stock prices, and so are the expectations of what those earnings will be. Positive surprises are bullish for stocks; negative surprises, bearish. First Call Earnings Surprise, a new feature under "Fundamentals," shows how much better or worse reported quarterly profits are from what Wall Street analysts were anticipating. This week, for instance, that figure is 2.5%, meaning that on average, earnings for the last quarter are beating expectations by 2.5%. The Earnings Surprise figure will appear during the third through ninth week of each quarter. At other times, as in the example (right), we'll report First Call Earnings Revision, which will show whether analysts are raising or lowering their profit forecasts for the next earnings period and by how much.
We also increased the number of broader market barometers and added more specialized indexes. One such index, the Bloomberg Information Age Index under "Markets & Sectors," consists of 100 leading U.S. companies that create the infrastructure and content for our digital society. Market indexes for Frankfurt, Hong Kong, and Mexico City have also joined the list. We also expanded mutual-fund leaders and laggards.
There's more to investing than stocks. Consider municipal bonds. Bloomberg Muni Yield Equivalents, another new feature, takes AAA yields in the tax-exempt market, compares them with U.S. Treasury bonds of a like maturity, and computes a taxable equivalent. For example, a 30-year AAA general obligation bond with a 5.45% yield is the equivalent of 7.90% in a taxable bond. That's far higher than the 6.44% yield on the 30-year U.S. bond, making munis an attractive buy for many investors.By Jeffrey M. Laderman in New YorkReturn to top
A Guide to the Features
The S&P 500 dividend yield is the combined dividends of the companies in the Standard & Poor's 500 divided by the "price" of the index. The price-earnings ratio of the S&P 500 is the S&P's price divided by the earnings per share. Here, it's calculated two ways. In the first calculation, the figure used for earnings is based on the last 12 months' worth of reported earnings. Some investors prefer to use a p-e that looks ahead. The second p-e uses a consensus earnings forecast for the 12 months ahead that First Call Corp. collects from Wall Street analysts. First Call Earnings Surprise measures how much better or worse reported quarterly profits are from the average of what investors were expecting prior to the announcement. This figure, calculated for the S&P 500 companies, will be published from the third through ninth week of the quarter, which is the earnings reporting season for the quarter just ended. First Call Earnings Revision measures the percent change in the consensus forecasts for the S&P 500 companies for profits that will be announced in the next reporting period. This figure will be reported from the tenth week of the quarter through the second week of the subsequent quarter.
The 26-week moving average of the S&P 500 measures what market technicians call momentum. The moving average is the average of the index values for the most recent 26 weeks. Trend followers buy when the S&P 500 rises above the moving average, and sell when it falls below. The percentage of stocks trading above their 26-week moving averages is another momentum indicator. When this figures drops below 40%, the market is considered oversold, and the indicator reads positive; above 70%, negative; and between 40% and 70%, neutral. The put/call ratio measures speculative sentiment. This ratio is a five-day average of total trading volume in puts, which are bets that stocks will fall, divided by total trading volume in calls, which are bullish bets. When the ratio is 0.70 or higher, it's positive for stocks; 0.60 or lower, negative; and between 0.60 and 0.70, neutral. The insider sell/buy ratio is calculated weekly by Vickers Stock Research Corp., based on SEC filings by "insiders" like executives and directors. The number here is an eight-week average of the ratio of insider sales to purchases. When the figure is 2.0 or less, it's positive; 2.5 or more, negative; and between 2.0 and 2.5, neutral.
The graph at left plots the Lehman Bond Treasury Index, a measure of bond performance. The index tracks a portfolio of Treasury securities with maturities of at least 10 years. The index measures price only, not interest income. The index value was 1,000 on Dec. 31, 1980. The key rates show a variety of yields that are important benchmarks. The money-market fund yield is an average of five general-purpose, taxable money-market mutual funds. The 6-month CD yield is based on an average of rates offered by major U.S. banks for deposits of $100,000 or more. The long-term corporate bonds are all 30-year maturities.
MARKETS & SECTORS
The Dow Jones industrial average is an average of prices on 30 blue-chip stocks. The Standard & Poor's 500, graphed on the left, is a capitalization-weighted index, as are the other S&P indexes shown here. The NASDAQ OTC Composite is a cap-weighted index of some 5,200 over-the-counter-stocks. The Bloomberg Information Age Index is a cap-weighted index of 100 stocks designed to track companies in the information business. The Pacific Stock Exchange Technology Index, on the other hand, is a price-weighted index of the top 100 technology stocks, including biotechnology and medical technology. The foreign market indexes shown here are cap-weighted, except for Nikkei 225, which is price-weighted, and the DAX, which is based on total return.
What's hot? What's not? This section looks at the industry groups that are demonstrating the best and worst price performance, both on a short-term (four-week) and longer-term (52-week) basis. It's an indicator favored by some investors. These groups are all subsets of the S&P 500. No foreign or non-S&P 500 stocks are included. For instance, the oil- and gas-drilling stocks, one of the strongest long-term groups, comprises the drilling companies that are in the S&P.
MONEY FLOW ANALYSIS
Sometimes stock-price movements are not what they seem. For instance, if 1,000 shares trade up 1/4 (25 cents) and the next 200 shares trade down 1/4, the price of the stock is unchanged. But in effect, there's a net inflow of money into the stock of 800 shares times the price of those shares. Bloomberg tracks every trade less than 10,000 shares in the listed and OTC market for the last month, measuring the net flow position for each. The first group shows stocks with significant buying although the stock price has fallen. These stocks are candidates for a rebound. The second group shows stocks where significant selling has taken place, even though the stock's price behavior does not show that. These stocks are candidates for a decline in price.
MUNI YIELD EQUIVALENTS
Many investors like municipal bonds because the interest income is free from federal, and in some cases, state and local income tax. But that doesn't always make them a better buy than taxable bonds. This table helps turn muni bond yields into their taxable equivalents so that investors can compare them with yields on U.S. Treasuries. The calculation assumes the municipal bonds are rated AAA and the investor is in the 31% federal tax bracket. The higher the tax bracket, the more attractive municipal bonds are relative to taxables. These calculations do not count state and local taxes, which can make the munis look even better.
This section monitors equity funds. Total returns are calculated by Morningstar Inc. and assume reinvestment of dividends and capital gains. The graphs on the left show average returns for the last four and 52-week periods compared with the S&P 500 (as measured by the Vanguard Index 500 fund). Average U.S. diversified fund is a fund that invests in a broad portfolio of securities and mainly in the U.S. market. All equity funds include those American diversified funds, as well as funds investing outside the U.S. and specialty funds.Return to top