Asset Valuation & Allocation Models

Chia sẻ: Diemanh Diemanh | Ngày: | Loại File: PDF | Số trang:28

0
103
lượt xem
23
download

Asset Valuation & Allocation Models

Mô tả tài liệu
  Download Vui lòng tải xuống để xem tài liệu đầy đủ

The FSVM is missing a variable reflecting that the forward earnings yield is riskier than the government bond yield. How should we measure risk in the model? An obvious choice is to use the spread between corporate bond yields and Treasury bond yields. This spread measures the market’s assessment of the risk that some corporations might be forced to default on their bonds. Of course, such events are very unusual, especially for companies included in the S&P 500. However, the spread is only likely to widen during periods of economic distress, when bond investors tend to worry that profits won’t be sufficient to meet the debt-servicing obligations......

Chủ đề:
Lưu

Nội dung Text: Asset Valuation & Allocation Models

  1. R e s e a r c h Asset Valuation & Allocation July 30, 2002 Models Dr. Edward Yardeni (212) 778-2646 ed_yardeni@prusec.com Amalia F. Quintana (212) 778-3201 mali_quintana@prusec.com
  2. - Introduction - I. Fed’s Stock Valuation Model How can we judge whether stock prices are too high, too low, or just right? The purpose of this weekly report is to track a stock valuation model that attempts to answer this question. While the model is very simple, it has been quite accurate and can also be used as a stocks-versus-bonds asset allocation tool. I started to study the model in 1997, after reading that the folks at the Federal Reserve have been using it. If it is good enough for them, it’s good enough for me. I dubbed it the Fed’s Stock Valuation Model (FSVM), though no one at the Fed ever officially endorsed it. On December 5, 1996, Alan Greenspan, Chairman of the Federal Reserve Board, famously worried out loud for the first time about “irrational exuberance” in the stock market. He didn’t actually say that stock prices were too high. Rather he asked the question: “But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions….”1 He did it again on February 26, 1997.2 2 He probably instructed his staff to devise a stock market valuation model to help him evaluate the extent of the market’s exuberance. Apparently, they did so and it was made public, though buried, in the Fed’s Monetary Policy Report to the Congress, which accompanied Mr. Greenspan’s Humphrey-Hawkins testimony on July 22, 1997. 3 The Fed model was summed up in one paragraph and one chart on page 24 of the 25- page document (see following table). The chart shows a strong correlation between the S&P 500 forward earnings yield (FEY)—i.e., the ratio of expected operating earnings (E) to the price index for the S&P 500 companies (P), using 12- month-ahead consensus earnings estimates compiled by Thomson Financial First Call.—and the 10-year Treasury bond yield (TBY). The average spread between the forward earnings yield and the Treasury yield (i.e., FEY-TBY) is 29 basis points since 1979. This near-zero average implies that the market is fairly valued when the two are identical: 1) FEY = TBY Of course, in the investment community, we tend to follow the price-to-earnings ratio more than the earnings yield. The ratio of the S&P 500 price index to expected earnings (P/E) is highly correlated with the reciprocal of the 10-year bond yield, and on average the two have been nearly identical. In other words, the “fair value” price for the S&P 500 (FVP) is equal to expected earnings divided by the bond yield in the Fed’s valuation model: 2) FVP = E/TBY 1 http://www.federalreserve.gov/boarddocs/speeches/1996/19961205.htm 2 “We have not been able, as yet, to provide a satisfying answer to this question, but there are reasons in the current environment to keep this question on the table.” http://www.federalreserve.gov/boarddocs/hh/1997/february/testimony.htm 3 http://www.federalreserve.gov/boarddocs/hh/1997/july/ReportSection2.htm Page 2 / July 30, 2002 / Prudential Securities Asset Valuation & Allocation Models
  3. Excerpt from Fed’s July 1997 Monetary Policy Report: The run-up in stock prices in the spring was bolstered by unexpectedly strong corporate profits for the first quarter. Still, the ratio of prices in the S&P 500 to consensus estimates of earnings over the coming twelve months has risen further from levels that were already unusually high. Changes in this ratio have often been inversely related to changes in long-term Treasury yields, but this year’s stock price gains were not matched by a significant net decline in interest rates. As a result, the yield on ten-year Treasury notes now exceeds the ratio of twelve-month-ahead earnings to prices by the largest amount since 1991, when earnings were depressed by the economic slowdown. One important factor behind the increase in stock prices this year appears to be a further rise in analysts’ reported expectations of earnings growth over the next three to five years. The average of these expectations has risen fairly steadily since early 1995 and currently stands at a level not seen since the steep recession of the early 1980s, when earnings were expected to bounce back from levels that were quite low. The ratio of the actual S&P 500 price index to the fair value price shows the degree of overvaluation or undervaluation. History shows that markets can stay overvalued and become even more overvalued for a while. But eventually, overvaluation is corrected in three ways: 1) falling interest rates, 2) higher earnings expectations, and of course, 3) falling stock prices—the old fashioned way to decrease values. Undervaluation can be corrected by rising yields, lower earnings expectations, or higher stock prices. The Fed’s Stock Valuation Model worked quite well in the past. It identified when stock prices were excessively overvalued or undervalued, and likely to fall or rise: 1) The market was extremely undervalued from 1979 through 1982, setting the stage for a powerful rally that lasted through the summer of 1987. 2) Stock prices crashed after the market rose to a record 34% overvaluation peak during September 1987. 3) Then the market was undervalued in the late 1980s, and stock prices rose. 4) In the early 1990s, it was moderately overvalued and stock values advanced at a lackluster pace. 5) Stock prices were mostly undervalued during the mid-1990s, and a great bull market started in late 1994. 6) Ironically, the market was actually fairly valued during December 1996 when the Fed Chairman worried out loud about irrational exuberance. Prudential Securities Asset Valuation & Allocation Models / July 30, 2002 / Page 3
  4. 7) During both the summers of 1997 and 1998, overvaluation conditions were corrected by a sharp drop in prices. 8) Then a two- month undervaluation condition during September and October 1998 was quickly reversed as stock prices soared to a remarkable record 70% overvaluation reading during January 2000. This bubble was led by the Nasdaq and technology stocks, which crashed over the rest of the year, bringing the market closer to fair value II. New Improved Model The FSVM is missing a variable reflecting that the forward earnings yield is riskier than the government bond yield. How should we measure risk in the model? An obvious choice is to use the spread between corporate bond yields and Treasury bond yields. This spread measures the market’s assessment of the risk that some corporations might be forced to default on their bonds. Of course, such events are very unusual, especially for companies included in the S&P 500. However, the spread is only likely to widen during periods of economic distress, when bond investors tend to worry that profits won’t be sufficient to meet the debt-servicing obligations of some companies. Most companies won’t have this problem, but their earnings would most likely be depressed during such periods. The FSVM is also missing a variable for long-term earnings growth. My New Improved Model includes these variables as follows: 3) FEY = CBY – b · · LTEG where CBY is Moody’s A-rated corporate bond yield. LTEG is long-term expected earnings growth, which is measured using consensus five- year earnings growth projections. I/B/E/S International compiles these monthly. The “b” coefficient is the weight that the market gives to long-term earnings projections. It can be derived as - [FEY-CBY]/LTEG. Since the start of the data in 1985, this “earnings growth coefficient” averaged 0.1. Equation 3 can be rearranged to produce the following: 4) FVP = E ¸ ¸ [CBY – b · · LTEG] FVP is the fair value price of the S&P 500 index. Exhibit 10 shows three fair value price series using the actual data for E, CBY, and LTEG with b = 0.1, b = 0.2, and b = 0.25. The market was fairly valued during 1999 and the first half of 2000 based on the consensus forecast that earnings could grow more than 16% per year over the next five years and that this variable should be weighted by 0.25, or two and a half times more than the average historical weight. III. Back To Basics With the benefit of hindsight, it seems that these assumptions were too optimistic. But, Page 4 / July 30, 2002 / Prudential Securities Asset Valuation & Allocation Models
  5. this is exactly the added value of the New Improved FSVM. It can be used to make explicit the implicit assumptions in the stock market about the weight given to long-term earnings growth. The simple version has worked so well historically because the long- term growth component has been offset on average by the risk variable in the corporate bond market. IV. Stocks Versus Bonds The FSVM is a very simple stock valuation model. It should be used along with other stock valuation tools, including the New Improved version of the model. Of course, there are numerous other more sophisticated and complex models. The Fed model is not a market-timing tool. As noted above, an overvalued (undervalued) market can become even more overvalued (undervalued). However, the Fed model does have a good track record of showing whether stocks are cheap or expensive. Investors are likely to earn below (above) average returns over the next 12-24 months when the market is overvalued (undervalued). The next logical step is to convert the FSVM into a simple asset allocation model (Exhibit 1). I’ve done so by subjectively associating the “right” stock/bond asset mixes with the degree of over/under valuation as shown in the table below. For example, whenever stocks are 10% to 20% overvalued, I would recommend that a moderately aggressive investor should have a mix of 60% in stocks and 40% in bonds in their portfolio. Bonds/Stocks Asset Allocation Model More than 30% overvalued 70% bonds, 30% stocks 20% to 30% overvalued 50% bonds, 50% stocks 10% to 20% overvalued 40% bonds, 60% stocks 10% undervalued to 10% overvalued 30% bonds, 70% stocks 10% to 15% undervalued 20% bonds, 80% stocks More than 15% undervalued 10% bonds, 90% stocks Prudential Securities Asset Valuation & Allocation Models / July 30, 2002 / Page 5
  6. Page 6 / July 30, 2002 / Prudential Securities Asset Valuation & Allocation Models 80 80 ED YARDENI’S ASSET ALLOCATION MODEL: BONDS/STOCKS* 70 (for Moderately Aggressive Investor) 70 Stocks overvalued when greater than zero 60 60 Stocks undervalued when less than zero 50 50 40 40 - Asset Allocation - 70/30 30 30 50/50 20 20 40/60 10 10 30/70 0 0 30/70 -10 -10 20/80 -20 10/90 -20 -30 -30 7/26 Yardeni -40 -40 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 * Ratio of S&P 500 index to its fair value (12-month forward consensus expected operating earnings per share divided by the ten-year U.S. Treasury bond yield) minus 100. Monthly through March 1994, weekly after. Source: Thomson Financial.
  7. - Valuation Model - Figure 2. 1725 1725 1575 FED’S STOCK VALUATION MODEL (FSVM-1) 1575 1425 (ratio scale) 1425 1275 7/26 1275 1125 1125 975 975 825 S&P 500 Price Index 825 675 Fair-Value Price* 675 525 525 375 375 225 225 According to the Fed model, when stock Yardeni 75 75 prices are overpriced, 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 returns from stocks * 52-week forward consensus expected S&P 500 operating earnings per share divided by 10-year US Treasury are likely to be subpar bond yield. Monthly through March 1994, weekly after. Source: Thomson Financial. over the next 12-24 months. Better-than-average Figure 3. 70 70 returns tend to come FED’S STOCK VALUATION MODEL (FSVM-1)* from underpriced (percent) 60 60 markets. 50 50 40 40 30 30 20 20 Overvalued 10 10 0 0 -10 -10 -20 Undervalued -20 -30 -30 7/26 Yardeni -40 -40 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 * Ratio of S&P 500 Index to its Fair-Value (52-week forward consensus expected S&P 500 operating earnings per share divided by the 10-year US Treasury bond yield) minus 100. Monthly through April 1994, weekly thereafter. Source: Thomson Financial. Prudential Securities Asset Valuation & Allocation Models / July 30, 2002 / Page 7
  8. - Valuation Model - Figure 4. 18 18 S&P 500 EARNINGS YIELD & BOND YIELD 17 17 16 16 15 15 This chart appeared in Forward Earnings Yield* the Fed’s July 1997 14 14 10-Year US Treasury Monetary Policy 13 Bond Yield 13 Report to the 12 12 Congress. It shows a 11 11 very close correlation 10 10 between the earnings 9 9 yield of the stock market and the bond 8 8 yield. Another, more 7 7/26 7 familiar way to look at 6 6 it follows. 5 5 4 4 3 3 Yardeni 2 2 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 * 52-week forward consensus expected S&P 500 operating earnings per share divided by S&P 500 Index. Monthly through March 1994, weekly after. Source: Thomson Financial. Figure 5. 26 26 25 FORWARD P/E & BOND YIELD 25 24 24 23 23 22 7/26 22 The S&P 500 P/E 21 Ratio Of S&P 500 Price To Expected Earnings* 21 (using expected 20 Fair-Value P/E=Reciprocal Of 20 earnings) is highly 19 Ten-Year U.S. Treasury Bond Yield 19 correlated with 18 18 reciprocal of the bond 17 17 yield. 16 16 15 15 14 14 13 13 12 12 11 Actual Fair 11 Jun 14 18.1 20.1 10 Jun 21 18.1 20.7 10 9 Jun 28 17.5 20.7 9 Jul 5 17.1 20.7 8 Jul 12 16.6 21.2 8 7 Jul 19 15.8 21.4 7 Jul 26 14.9 22.4 6 6 Yardeni 5 5 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 * 52-week forward consensus expected S&P 500 operating earnings per share. Monthly through March 1994, weekly after. Source: Thomson Financial. Page 8 / July 30, 2002 / Prudential Securities Asset Valuation & Allocation Models
  9. - Earnings - Figure 6. 75 75 S&P 500 EARNINGS PER SHARE CONSENSUS FORECASTS (analysts’ average forecasts) 70 For 2001 For 2002 70 For 2003 Expected forward 65 65 earnings is a time-weighted average of current and 60 60 the coming years’ Forward consensus forecasts. Earnings* 7/26 55 55 50 50 45 45 Yardeni 40 40 I II III IV I II III IV I II III IV 2000 2001 2002 * 52-week forward consensus expected S&P 500 operating earnings per share. Time-weighted average of current year and next year’s consensus forecasts. Source: Thomson Financial. Figure 7. 65 65 S&P 500 EARNINGS PER SHARE: ACTUAL & EXPECTED 60 60 S&P 500 Earnings Per Share ________________________ 55 7/25 55 Forward Earnings* Bottom-up 52-week 50 (pushed 52-weeks ahead) 50 forward expected Operating Earnings earnings tends to be a 45 (4-quarter sum) 45 good predicator of Q1 actual earnings, with a 40 40 few significant misses. 35 35 30 30 25 25 20 20 15 15 Yardeni 10 10 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 * 52-week forward consensus expected S&P 500 operating earnings per share. Monthly through March 1994, weekly after. Source: Thomson Financial. Prudential Securities Asset Valuation & Allocation Models / July 30, 2002 / Page 9
  10. - Earnings - Figure 8. 75 75 S&P 500 CONSENSUS OPERATING EARNINGS PER SHARE (analysts’ bottom-up forecasts) 70 01 02 70 Consensus Forecasts __________________ 03 65 65 12-month forward 60 Annual estimates 00 60 99 Actual 4Q sum Jul 55 98 55 50 50 97 45 96 45 40 40 95 35 91 94 35 92 93 30 30 25 25 Yardeni 20 20 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Analysts always start Source: Thomson Financial. out too optimistic about the prospects for earnings. Figure 9. 35 35 S&P 500 CONSENSUS OPERATING EARNINGS PER SHARE (analysts’ bottom-up forecasts, ratio scale) 90 30 30 Consensus Forecasts _________________ 89 12-month forward Annual estimates 88 25 25 Actual 4Q sum 85 87 86 82 83 20 84 20 81 80 15 15 Yardeni 10 10 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 Source: Thomson Financial. Page 10 / July 30, 2002 / Prudential Securities Asset Valuation & Allocation Models
  11. - Earnings - Figure 10. 25 25 S&P 500 EARNINGS PER SHARE 20 20 7/26 15 15 The data on consensus expected 10 10 earnings can be used to derive consensus 5 7/26 5 earnings growth forecasts. 0 0 -5 -5 Consensus Growth Forecasts* _______________ -10 2001/2000 -10 2002/2001 -15 -15 2003/2002 Yardeni -20 -20 I II III IV I II III IV I II III IV 2000 2001 2002 * Based on consensus expected S&P 500 operating earnings per share for years shown. Source: Thomson Financial. Figure 11. 45 45 S&P 500 OPERATING EARNINGS PER SHARE* 40 (yearly percent change) 40 35 Actual 35 30 Consensus Forecast 30 Earnings growth is 25 (Proforma)* Q4 25 highly cyclical. 20 20 15 15 10 10 5 5 0 0 -5 -5 -10 -10 -15 -15 -20 -20 -25 -25 Yardeni -30 -30 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 * S&P 500 composition is constantly changing. Actual data are not adjusted for these changes. Proforma forecasts are same-company comparisions. Source: Thomson Financial. Prudential Securities Asset Valuation & Allocation Models / July 30, 2002 / Page 11
  12. - New Improved Model - Figure 12. 2000 2000 FED’S STOCK VALUATION MODEL (FSVM-2) 1800 1800 This second version of 1600 1600 the Fed’s Stock .25 Valuation Model builds 1400 Actual S&P 500 1400 on the simple one by Fair Value S&P 500* .20 1200 1200 adding variables for 5-year earnings long-term expected growth weight _____________ 1000 1000 earnings growth and .25 .10 risk. 800 .20 7/26 800 .10 600 600 400 400 200 200 Yardeni 0 0 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 * Fair Value is 12-month forward consensus expected S&P 500 operating earnings per share divided by difference between Moody’s A-rated corporate bond yield less fraction (as shown above) of 5-year consensus expected earnings growth. Source: Thomson Financial Figure 13. 30 30 LONG-TERM CONSENSUS EARNINGS GROWTH* (annual rate, percent) Long-term earnings S&P 500 growth expectations 25 25 S&P 500 Information Technology rose sharply during 1990s. They fell Ex Information Technology sharply from 2000-2002. 20 20 Jul 15 15 Yardeni 10 10 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 * 5-year forward consensus expected S&P 500 earnings growth. Data from 1995 based on new Global Industry Classification Standard. Source: Thomson Financial. Page 12 / July 30, 2002 / Prudential Securities Asset Valuation & Allocation Models
  13. - New Improved Model - Figure 14. 40 40 MARKET’S WEIGHT FOR 5-YEAR CONSENSUS EXPECTED EARNINGS GROWTH* (percent) 35 35 Weight market gives to long-term earnings growth ________________________________________ 30 value > 13% = more than average weight 30 Investors have on value < 13% = less than average weight average over time 25 25 subtracted 13% of their long-term 20 20 earnings growth Average = 13% expectations from the corporate bond yield 15 15 to determine earnings Jun yield. 10 10 5 5 0 0 Yardeni -5 -5 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 * Moody’s A-rated corporate bond yield less earnings yield divided by 5-year consensus expected earnings growth. * Source: Standard and Poor’s Corporation, Thomson Financial and Moody’s Investors Service. Figure 15. 1.6 1.6 S&P 500 PEG RATIO 1.5 1.5 P/E ratio for S&P 500 divided by 5-year consensus Historically, S&P 500 1.4 expected earnings growth* 1.4 sold at P/E of 1.2 times Jun long-term expected 1.3 1.3 earnings growth, on average, with quite a 1.2 Average = 1.2 1.2 bit of volatility. 1.1 1.1 1.0 1.0 .9 .9 Yardeni .8 .8 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 * P/E using 12-month forward consensus S&P 500 expected earnings and prices at mid-month. Source: Thomson Financial. Prudential Securities Asset Valuation & Allocation Models / July 30, 2002 / Page 13
  14. - New Improved Model - Figure 16. 12 12 CORPORATE BOND YIELD (percent) 11 11 10 10 A-Rated 9 9 8 8 7 7/26 7 Yardeni 6 6 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Corporate bond yield variable in FSVM-2 Source: Moody’s Investors Service. captures risk that earnings will be weaker than expected. Figure 17. 400 400 CORPORATE SPREAD* (basis points) 350 350 300 300 Moody’s A-Rated Corporate Bond Yield Minus 10-Year US Treasury Bond Yield 7/26 250 250 200 200 150 150 100 100 Average = 131 50 50 Yardeni 0 0 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 * Monthly through 1994, weekly thereafter. Source: Board of Governors of the Federal Reserve System and Moody’s Investor Service. Page 14 / July 30, 2002 / Prudential Securities Asset Valuation & Allocation Models
  15. Figure 18. - Global: Expected Earnings* - 65 325 UNITED STATES (S&P 500) GERMANY (DAX) 300 60 Jul 275 55 250 Jul 50 225 Expected EPS* Expected EPS 45 (dollars) (euros) 200 175 40 150 35 125 30 100 25 75 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 550 280 CANADA (TSE 300) FRANCE (CAC 40) 525 260 500 475 240 450 Jul Expected EPS (euros) 220 425 Expected EPS Jul (Canadian dollars) 200 400 375 180 350 160 325 300 140 275 120 250 225 100 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 360 70 UNITED KINGDOM (FT 100) JAPAN (TOPIX) 340 320 60 300 Expected EPS Expected EPS (pounds) (yen) 50 280 Jul 260 40 240 220 Jul 30 200 Yardeni 180 20 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 * 12-month forward consensus expected operating earnings per share. Source: Thomson Financial. Prudential Securities Asset Valuation & Allocation Models / July 30, 2002 / Page 15
  16. - Global: Stock Valuation - Figure 19. 80 80 UNITED STATES 60 60 40 Overvalued 40 20 20 0 0 Jun -20 -20 Undervalued -40 -40 1995 1996 1997 1998 1999 2000 2001 2002 2003 50 50 CANADA 30 Overvalued 30 10 10 -10 Jun -10 Undervalued -30 -30 1995 1996 1997 1998 1999 2000 2001 2002 2003 40 40 UNITED KINGDOM 20 Overvalued 20 Jun 0 0 -20 Undervalued -20 -40 -40 1995 1996 1997 1998 1999 2000 2001 2002 2003 80 80 GERMANY 60 60 40 Overvalued 40 20 20 0 0 Jun -20 Undervalued -20 -40 -40 1995 1996 1997 1998 1999 2000 2001 2002 2003 60 60 FRANCE 40 40 20 Overvalued 20 0 0 Jun -20 Undervalued -20 -40 -40 1995 1996 1997 1998 1999 2000 2001 2002 2003 200 200 JAPAN 150 150 100 100 Overvalued 50 50 0 0 -50 -50 Yardeni Undervalued Jun -100 -100 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: Thomson Financial. Page 16 / July 30, 2002 / Prudential Securities Asset Valuation & Allocation Models
  17. Figure 20. - Global: United States (S&P 500) - 160 70 STOCK VALUATION MODEL 150 60 140 Jul 130 50 Industrial Production 120 (1987=100) 40 110 100 30 90 Expected Earnings Per Share* 20 80 For S&P 500 (dollars) 70 10 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 30 30 25 25 Fair-Value P/E 20 Jun 20 Forward P/E 15 15 10 10 5 5 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 1825 1825 1475 1475 1125 1125 Stock Price Index (S&P 500) Jun 775 (ratio scale) 775 Fair-Value Price 425 (ratio scale) 425 75 75 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 70 70 60 60 50 50 40 40 30 30 Overvalued 20 20 10 10 0 0 -10 Jun -10 -20 -20 -30 Undervalued -30 Yardeni -40 -40 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 Source: Thomson Financial. Prudential Securities Asset Valuation & Allocation Models / July 30, 2002 / Page 17
  18. Figure 21. - Global: Canada (TSE 300) - 120 550 STOCK VALUATION MODEL 525 115 Apr Expected Earnings Per Share 500 110 for TSE 300 (Canadian dollars) 475 Jul 450 105 425 100 400 95 375 350 90 325 85 Industrial Production 300 (1997=100) 275 80 250 75 225 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 24 24 22 22 Fair-Value P/E 20 Forward P/E 20 18 18 Jun 16 16 14 14 12 12 10 10 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 12500 12500 10500 10500 Stock Price Index (TSE 300) 8500 (ratio scale) 8500 Fair-Value Jun 6500 (ratio scale) 6500 4500 4500 2500 2500 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 50 50 40 40 30 30 20 Overvalued 20 10 10 0 0 Jun -10 -10 -20 Undervalued -20 Yardeni -30 -30 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 * Source: Thomson Financial. Page 18 / July 30, 2002 / Prudential Securities Asset Valuation & Allocation Models
  19. Figure 22. - Global: United Kingdom (FT 100) - 110 350 STOCK VALUATION MODEL 105 300 100 Industrial Production (1995=100) 250 95 Jul 200 90 Expected Earnings Per Share for FT 100 (pounds) 85 150 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 25 25 23 23 21 Fair-Value P/E 21 19 Jun 19 Forward P/E 17 17 15 15 13 13 11 11 9 9 7 7 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 7900 7900 7100 7100 6300 Stock Price Index (FT 100) 6300 5500 (ratio scale) 5500 4700 Jun 4700 Fair-Value 3900 (ratio scale) 3900 3100 3100 2300 2300 1500 1500 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 40 40 30 30 20 Overvalued 20 10 10 Jun 0 0 -10 -10 Undervalued -20 -20 Yardeni -30 -30 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: Thomson Financial. Prudential Securities Asset Valuation & Allocation Models / July 30, 2002 / Page 19
  20. Figure 23. - Global: Germany (DAX) - 120 325 STOCK VALUATION MODEL 300 275 Jul 250 110 Industrial Production (1995=100) 225 200 175 100 150 Expected Earnings Per Share 125 for DAX (Euros) 100 90 75 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 34 34 32 32 30 30 28 Fair-Value P/E 28 26 Forward P/E 26 24 24 22 22 20 Jun 20 18 18 16 16 14 14 12 12 10 10 8 8 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 11000 11000 9000 9000 7000 Stock Price Index (DAX) 7000 (ratio scale) 5000 5000 Fair-Value Jun (ratio scale) 3000 3000 1000 1000 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 80 80 60 60 40 Overvalued 40 20 20 0 0 Jun -20 -20 Undervalued Yardeni -40 -40 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: Thomson Financial. Page 20 / July 30, 2002 / Prudential Securities Asset Valuation & Allocation Models
Đồng bộ tài khoản