Japanese equities post big losses:STOCKS FOR the long run? Tell that to Japanese investors. While the Nikkei has been battered of late, falling by 20 per cent since March, the broader Topix index is worse, recently falling to a 28-year low. Nine straight weeks of losses – the longest losing run since 1975 – have taken the index to levels unseen since late 1983.
Japanese equities hit an all-time high in 1989 and have since fallen by almost 80 per cent.
There have been cyclical rallies – the Nikkei enjoyed three major rallies in the 1990s, bouncing by 34, 50 and 56 per cent, and it enjoyed the mother of all sucker rallies between 2003 and 2006, when it rose by 135 per cent. Each has been a false dawn and equities now need to rise fivefold simply to return to 1989 levels.
Apple’s a buy, says influential Einhorn
APPLE’S CASH holdings, some $110 billion, will top $200 billion by September 2013, according to Bullish Cross analysis – almost 40 per cent of its current market value. Soaring revenues and cash generation mean the stock looks cheap, says influential hedge fund manager David Einhorn.
Einhorn recently argued that Apple shares were not priced for growth and suggested sceptics were tied to the notion that Apple must soon falter, just as Cisco, Intel and Microsoft did when they reached similar valuations in days gone by.
“We’ve scoured the Nasdaq listing rules, reviewed the Securities Exchange Act of 1934 and engaged a leading numerologist,” Einhorn said. “We can’t find any prohibition on trillion dollar market capitalisations.”
Tech stocks start to look toppy
THE LIKES of Microsoft, Cisco and Intel are slow-moving value stocks today, trading on low price- earnings ratios and boasting enormous cash holdings. While the big names appear cheap, the overall technology, media and telecoms (TMT) sector is pricey, according to Société Générale.
Excluding the dotcom bubble period, says SocGen, the sector is trading on a cyclically adjusted price-earnings ratio close to its historical high. The same holds true for global IT stocks if one examines historical book values, it adds. Meanwhile, the Nasdaq’s performance relative to US banks is at an all-time high, SocGen says.
Bespoke Investment group, too, notes that the tech sector accounts for almost 20 per cent of the SP 500, “solidly above” its long-term average of 15 per cent.
Dividends on the rise in Europe
THERE MAY be uncertainty over European corporate earnings but it isn’t preventing dividend hikes. Shore Capital notes that while one in five European firms has cut dividends, half have upped them.
The proportion of earnings paid out in dividends has averaged about 40 per cent over the past 15 years, but has risen to 50 per cent recently. The economic climate means capital expenditure is muted, leaving cash on balance sheets. Companies are hoping increased dividends override investors’ growth concerns.
The UK situation is similar, with 80 per cent of the largest UK companies increasing dividends by an average of 16 per cent last year. Shore Capital predicts UK dividends will again rise by more than 10 per cent this year.
People will pay for useless advice
A NEW study concludes that the average person is “often happy to pay for what could only be described as transparently useless advice”. The study involved a group of students making bets on the toss of a coin. Each got an envelope containing a prediction for the coin toss outcome. They could either pay to see the prediction in advance or freely see the prediction afterwards.
Those who saw just two correct predictions were 15 per cent more likely to buy a prediction for the third toss. Those who saw four correct tips were 28 per cent more likely to buy the prediction for the fifth round. Little wonder that the internet abounds with stock tipsters peddling their wares.
