Registered User
Joined: 12/27/2004
Posts: 15
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in reply to sunbird
"Has anyone done any statistical analyses to determine the relationship between fundamentals like earnings/sales/divedends and the FUTURE course of stock prices?"
This in itself is a very interesting question.
There is NO DOUBT that fundamentals do count.
Dot com euphoria:
So, prices skyrocketed, and plummeted. The fundamentals never changed. No balance sheet, no profitability, no longer with us. RIP.
YET
looking at potentially the best company in the world (GE)which had steady rising earnings at least from 1995 thru mid 2002, the stock dropped 60-ish to 22-ish along with the market.
The difference between Dot Com and GE is no doubt fundamentals AND that GE is still here.
That leads me to believe that fundamentals DO count, especially over time. Very short term, it does not really matter. After all, investors anticipate and in short timeframes, prices move far faster than fundamentals adjust.
So, having said that:
Go to TC 2000, scan for top 10% earnings and revenue growth.
Maybe even top 10% dividend growth.
The top 10% is your quality funda watch list.
do the same for the bottom 10%, this is poor funda watch list.
now you can back test the two groups for varying timeframes. My bet is that you will find that short term both groups will be mixed (hence technical analysis is more important than fundamentals) and that longer term (e.g . 5+ years) the quality names will prevail (fundamentals more important than technical analysis. and dont forget to add in the dividends of the companies)
Of course, high flying companies without earnings today cna very well become the earning quality company tomorrow. These are, however, in that "growth" spectrum a defined minority. How many companies failed next to the MSFT's of the world?
hope this is enjoyable. I will be trying to find a statistical answer.
Gz
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