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INM July 2011 - Maybe You Can't Handle The Truth
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net
I ended up in a heated debate with a friend of a friend who was recently complaining that the rich should pay more taxes. He claimed that no jobs were created or saved by the Bush-era tax cuts because everyone just pocketed the increased profits. He said criminals run most of the large companies that benefit by continuing to prolong the tax cuts, then said he would gladly pay more in taxes for them to build jails for all of the criminals. I got a bit hot under the collar when the fellow also lashed out and suggested I am, "In the business of shoveling around useless green paper." Spoken like who guy who obviously doesn't have enough of the stuff!
The guy I am speaking of could have been a great songwriter in the blues genre instead of a self-proclaimed "computer person". He spun the story of how his clients in the medical industry put projects on hold indefinitely due to money problems, plus layoffs. One medical lab was bankrupt, another had put a project on hold, and a dental firm had put a project on hold indefinitely due to money problems. One retailer went bankrupt, and another one put its projects on hold and was in collections. Two restaurants went bankrupt, both owing him quite a bit of money that he will never see. Then he said his clients in the auto parts industry all put their projects on hold "due to customers not repairing their cars due to no money", and followed that up with claims that an auto-recycling firm put its project on hold due to more cars being retained and not replaced.
I pointed out that my studies have shown me something different. Most of the publicly owned auto parts related firms I can find are doing very well right now, specifically because people are not buying as many new cars they cannot afford, they are in fact fixing their old cars. I pointed to Autozone Inc (AZO) in Memphis, TN, Monroe Muffler Brake Inc (MNRO) in Rochester, NY, O'Reilly Automotive Inc (ORLY) in Springfield, MO, Copart Inc (CPRT) in Fairfield, CA, LKQ Corp (LKQX) in Chicago, IL, Dorman Products Inc (DORM) in Colmar, PA, Motorcar Parts of America Inc (MPAA) in Torrance, CA, and Standard Motor Products Inc (SMP) in Long Island, NY. There were 8 solid examples spread all around the country, and most of those companies appear to be rolling in dough showing improving sales revenues and earnings while their stocks are perched near all-time high prices.
The negative-minded computer guy answered back, "My clients would disagree, and that is by looking at their own books, not some fabricated report. The first thing they teach someone in basic college-level statistics is how to make a study show the outcome that you desire, no matter what the truth really is. I've been in such classes."
I hated to disappoint him, then explained that the analysis I do on companies' health is both technical and fundamental. In fact, a company's quarterly and annual earnings history or "the books" is about 60% of weighting in my fact based analysis. The hearsay concerning his clients was dismissed as a "fabricated report", whereas I responded by providing very professional fact-based analysis.
All of the above listed auto-parts firms all have Earnings Per Share ranks that are 80+ (on a scale of 1-99) from the newspaper, so their earnings histories are ranked in the top 20% of all publicly traded companies in the entire spectrum of stocks traded. Their Growth Rates are AZO +19%, MNRO +17%, ORLY +16%, CPRT +10%, LKQX +29%, DORM +22%, MPAA +39%, SMP N/A. This item is calculated by our data provider by using a least squares regression fit over a 3-to-5 year period of earnings per share based on a trailing four-quarter count. For example, if a stock is currently in its second quarter, the first period used in this calculation will consist of the sum of Q2 + Q1 (of the current fiscal year) plus Q4 +Q3 (of the prior fiscal year). Each successive period will be based on the next trailing four quarters of earnings per share. The amount of time used to calculate the Growth Rate is based on two factors - Availability of data, and Positive earnings. If a stock does not have at least three years of positive earnings (based on the trailing four-quarter method noted above), an "N/A" will appear. The amount of time used for this calculation consists of at least three years but no more than five years of positive earnings per share. If a four-quarter period sum is negative, that period and additional earnings further back in time, is not be used in the calculation of this data item. Anyhow, those are the important facts concerning the A criteria (annual earnings history), not hearsay.
That friend of a friend probably doesn't know that HMO stocks have been leading gainers in 2011 either. Year-to-date the Healthcare Index ($HMO) is +43.83% and profits have been soaring at the bottom line for many of the companies. He probably doesn't know that the S&P 600 Small Cap Index and the S&P 400 Mid-Cap Index hit new all-time highs in 2011 either. He'd probably say it was due to "criminal activity" once he checked and confirmed I was right. Those major stock market indexes did not get there completely by accident, did they? It was being predicted last year in my quarterly webcasts, and came as no surprise to our regular readers who know.
At least he had an excuse for me to cut him some slack. The classes he went to in college may be a reasonable explanation for why his current "studies" were showing him only the truth he wanted to see. Those guilty of brainwashing folks like him are truly the worst criminals. I'd like to see them put in jail. It can't be completely their own fault that some are so deluded.
Kenneth J. Gruneisen, Founder and Contributing Writer, www.CANSLIM.net :
Kenneth J. Gruneisen has successfully completed the CAN SLIM® Certification Program. Mr. Gruneisen became a Registered Representative in 1987 and his career includes experience offering personalized assistance to investors with more than a decade of experience as a Registered Principal managing a branch office.
The recommendations made by CAN SLIM® certified individuals are their own and may not be attributed to the CAN SLIM® Certification Program, William O'Neil & Co., Investor's Business Daily or their affiliates. The CAN SLIM® Certification indicates only that the individual has successfully completed the CAN SLIM® Certification Program. CAN SLIM®, William O'Neil & Co., Investor's Business Daily and any of their affiliates are in no way responsible for any loss or damage caused as a result of the services provided by these individuals.