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Where is the revenue growth in the DJIA?


RuleNumberOne
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In the latest quarter, we have these revenue growth figures for DJIA members:

 

PFE  -9%

JNJ    1.8%

UTX  1% organic

IBM  0.1% (very inorganic)

MMM  2.1% (down 1.9% for the year)

AAPL  (revenue up 4% from two years ago, stock is up 81% from two years ago)

PG    (5% but revenue is below where it was pre-2015, has seen lot of negative quarters)

 

JPM had the strongest revenue growth.

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I would encourage you to pay no attention to a cap weighted arbitrary collection of 30 companies. Let's look at the generally accepted US stock benchmark: the Russell 3000

 

Russell 3000 Sales / Share:

2013-2019 

686.10 720.06 707.51 719.81 779.70 840.00 889.80

 

Below are the top 100 3 year average growth. the median for the entire 3000 company data (errors=0%) set is 7.4%. the average of the top 100 is 9.9%.

 

for the trailing 12 months, the median of the whole 3000 is 5.1, average of top 100 is 8%.

 

You will likely point out that some of these may be M&A driven and not organic; that would be a reasonable counter.

 

I would not extrapolate a conclusion about the market by looking at 7 companies that happen to be part of a shitty and archaic index weighted in a way that only made sense before calculators and computers were widespread.

 

 

Sales 3 Yr Average Growth

AAPL US Equity 6.7%

MSFT US Equity 11.4%

AMZN US Equity 29.6%

FB US Equity 46.2%

BRK/B US Equity 2.5%

GOOG US Equity 22.2%

GOOGL US Equity 22.2%

JPM US Equity 10.6%

JNJ US Equity 4.5%

V US Equity 15.2%

PG US Equity 1.2%

INTC US Equity 6.7%

MA US Equity 16.2%

T US Equity 3.5%

XOM US Equity 6.9%

BAC US Equity 6.7%

UNH US Equity 9.4%

HD US Equity 6.9%

VZ US Equity -0.1%

DIS US Equity 8.0%

MRK US Equity 2.3%

KO US Equity -8.1%

PFE US Equity -0.7%

CVX US Equity 10.8%

CSCO US Equity 1.8%

PEP US Equity 0.8%

CMCSA US Equity 10.6%

WFC US Equity 3.3%

ADBE US Equity 24.0%

C US Equity 7.5%

BA US Equity -5.4%

WMT US Equity 2.2%

MDT US Equity 2.0%

MCD US Equity -5.0%

ABT US Equity 15.8%

CRM US Equity 25.8%

BMY US Equity 10.9%

NFLX US Equity 31.7%

NVDA US Equity 33.0%

PYPL US Equity 18.7%

COST US Equity 8.8%

AMGN US Equity 3.1%

ACN US Equity 7.5%

TMO US Equity 12.9%

PM US Equity 3.5%

NEE US Equity 6.2%

HON US Equity 2.7%

UNP US Equity 3.0%

UTX US Equity 10.5%

ABBV US Equity 12.8%

NKE US Equity 6.5%

IBM US Equity -1.2%

AVGO US Equity 19.9%

TXN US Equity 2.8%

LLY US Equity 7.2%

LIN US Equity 0.0%

ORCL US Equity 2.2%

LMT US Equity 8.2%

SBUX US Equity 7.6%

AMT US Equity 16.0%

QCOM US Equity 1.1%

GE US Equity -6.7%

DHR US Equity 11.4%

XTSLA US Equity 0.0%

MO US Equity 1.4%

LOW US Equity 6.5%

CVS US Equity 8.4%

MMM US Equity 2.2%

FIS US Equity 9.7%

AXP US Equity 8.2%

GILD US Equity -12.1%

TSLA US Equity 74.5%

UPS US Equity 7.2%

BKNG US Equity 16.4%

MDLZ US Equity -4.2%

ADP US Equity 6.7%

GS US Equity 13.0%

USB US Equity 6.8%

CHTR US Equity 81.9%

BDX US Equity 12.4%

CME US Equity 9.2%

CI US Equity 8.9%

TJX US Equity 8.0%

ANTM US Equity 7.2%

TFC US Equity 7.9%

SYK US Equity 9.5%

CAT US Equity 6.8%

SPGI US Equity 5.6%

SO US Equity 10.5%

INTU US Equity 13.1%

DUK US Equity 3.1%

D US Equity 4.6%

CB US Equity 23.2%

FISV US Equity 3.5%

COP US Equity 9.4%

ZTS US Equity 7.0%

PNC US Equity 9.6%

ISRG US Equity 18.3%

RTN US Equity 5.1%

CCI US Equity 14.2%

 

loomberg description of the metric:  Calculated as three-year arithmetic average growth of Sales/Revenue/Turnover (IS010, SALES_REV_TURN). For interim periods, the comparative period is the same interim period three periods earlier. Unit: Actual.API:

current value available, historical values available

 

 

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Yeah, the 2013-2019 revenue growth looks good. And the 2009-2019 revenue growth would look even better. But that is because you are measuring from when the business cycle began.

 

Today morning two more DJIA members reported for the latest quarter:

DOW -14% revenue growth, -20% Operating EBIT.

BA    -21% revenue growth -43% Operating income growth

 

Do you people think I didn't know the DJIA was price-weighted? It is not an arbitrary collection. You need to be a large and dominant company in an industry before you can get into the DJIA. And 30 was a small enough number for me to go through it one by one. I don't have time to go through the 500 companies in the S&P 500 this quarter.

 

 

I would encourage you to pay no attention to a cap weighted arbitrary collection of 30 companies. Let's look at the generally accepted US stock benchmark: the Russell 3000

 

Russell 3000 Sales / Share:

2013-2019 

686.10 720.06 707.51 719.81 779.70 840.00 889.80

 

Below are the top 100 3 year average growth. the median for the entire 3000 company data (errors=0%) set is 7.4%. the average of the top 100 is 9.9%.

 

for the trailing 12 months, the median of the whole 3000 is 5.1, average of top 100 is 8%.

 

You will likely point out that some of these may be M&A driven and not organic; that would be a reasonable counter.

 

I would not extrapolate a conclusion about the market by looking at 7 companies that happen to be part of a shitty and archaic index weighted in a way that only made sense before calculators and computers were widespread.

 

 

Sales 3 Yr Average Growth

AAPL US Equity 6.7%

MSFT US Equity 11.4%

AMZN US Equity 29.6%

FB US Equity 46.2%

BRK/B US Equity 2.5%

GOOG US Equity 22.2%

GOOGL US Equity 22.2%

JPM US Equity 10.6%

JNJ US Equity 4.5%

V US Equity 15.2%

PG US Equity 1.2%

INTC US Equity 6.7%

MA US Equity 16.2%

T US Equity 3.5%

XOM US Equity 6.9%

BAC US Equity 6.7%

UNH US Equity 9.4%

HD US Equity 6.9%

VZ US Equity -0.1%

DIS US Equity 8.0%

MRK US Equity 2.3%

KO US Equity -8.1%

PFE US Equity -0.7%

CVX US Equity 10.8%

CSCO US Equity 1.8%

PEP US Equity 0.8%

CMCSA US Equity 10.6%

WFC US Equity 3.3%

ADBE US Equity 24.0%

C US Equity 7.5%

BA US Equity -5.4%

WMT US Equity 2.2%

MDT US Equity 2.0%

MCD US Equity -5.0%

ABT US Equity 15.8%

CRM US Equity 25.8%

BMY US Equity 10.9%

NFLX US Equity 31.7%

NVDA US Equity 33.0%

PYPL US Equity 18.7%

COST US Equity 8.8%

AMGN US Equity 3.1%

ACN US Equity 7.5%

TMO US Equity 12.9%

PM US Equity 3.5%

NEE US Equity 6.2%

HON US Equity 2.7%

UNP US Equity 3.0%

UTX US Equity 10.5%

ABBV US Equity 12.8%

NKE US Equity 6.5%

IBM US Equity -1.2%

AVGO US Equity 19.9%

TXN US Equity 2.8%

LLY US Equity 7.2%

LIN US Equity 0.0%

ORCL US Equity 2.2%

LMT US Equity 8.2%

SBUX US Equity 7.6%

AMT US Equity 16.0%

QCOM US Equity 1.1%

GE US Equity -6.7%

DHR US Equity 11.4%

XTSLA US Equity 0.0%

MO US Equity 1.4%

LOW US Equity 6.5%

CVS US Equity 8.4%

MMM US Equity 2.2%

FIS US Equity 9.7%

AXP US Equity 8.2%

GILD US Equity -12.1%

TSLA US Equity 74.5%

UPS US Equity 7.2%

BKNG US Equity 16.4%

MDLZ US Equity -4.2%

ADP US Equity 6.7%

GS US Equity 13.0%

USB US Equity 6.8%

CHTR US Equity 81.9%

BDX US Equity 12.4%

CME US Equity 9.2%

CI US Equity 8.9%

TJX US Equity 8.0%

ANTM US Equity 7.2%

TFC US Equity 7.9%

SYK US Equity 9.5%

CAT US Equity 6.8%

SPGI US Equity 5.6%

SO US Equity 10.5%

INTU US Equity 13.1%

DUK US Equity 3.1%

D US Equity 4.6%

CB US Equity 23.2%

FISV US Equity 3.5%

COP US Equity 9.4%

ZTS US Equity 7.0%

PNC US Equity 9.6%

ISRG US Equity 18.3%

RTN US Equity 5.1%

CCI US Equity 14.2%

 

loomberg description of the metric:  Calculated as three-year arithmetic average growth of Sales/Revenue/Turnover (IS010, SALES_REV_TURN). For interim periods, the comparative period is the same interim period three periods earlier. Unit: Actual.API:

current value available, historical values available

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Okay, so we only want to use those 30 and the most recent 12 months. Median and Average growth of 2.6% and 2.9%. Weighted by market cap its 4.5%.

 

Why are you focusing on the 7 negative ones and not the 23 positive ones.

 

Again, I'm not super bullish, but I think you are selective with your bearish data points. Maybe some of the below doesn't incorporate the most recent quarter so it's actually worse.

 

You asked where the growth was. it appears to be in the ones you didn't point out.

 

Why is DOW more important than DIS? Why is PFE more important than MRK? BA more important than CAT?

 

Is MSFT late in the cycle of its product cylce. It's supposed to end 6/2020 with $140 billion of revenue, up from $110 billion in 2018. It's a Dow component, thats 20x the size of DOW.

 

 

AAPL US Equity 2.3%

BA US Equity -24.3%

UNH US Equity 7.0%

GS US Equity 2.7%

HD US Equity 5.1%

MCD US Equity 0.2%

V US Equity 11.5%

MMM US Equity -1.9%

MSFT US Equity 13.0%

UTX US Equity 15.9%

JNJ US Equity 0.6%

IBM US Equity -3.1%

DIS US Equity 17.1%

CAT US Equity 3.2%

JPM US Equity 9.3%

TRV US Equity 4.3%

AXP US Equity 8.6%

PG US Equity 4.0%

WMT US Equity 1.8%

CVX US Equity -4.9%

NKE US Equity 7.1%

MRK US Equity 10.2%

INTC US Equity 1.6%

XOM US Equity -5.6%

VZ US Equity 0.6%

KO US Equity 3.4%

WBA US Equity 2.1%

CSCO US Equity 3.4%

DOW US Equity -13.5%

PFE US Equity -3.5%

 

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^I just spent a few (unaudited) seconds on this and, for fun, used some of the above mentioned inputs:

Annualized "returns" (total return for the index), period 2013-2019:

-Nominal GDP:                                                        4.1-4.2% (may need a minor adjustment with tomorrow's release)

-sales growth, members of Russell 3000:                  4.4%

-total return R3000 index:                                      13.6%

 

Of course, this may be considered irrelevant for individual picks and maybe this is just a catching-up phase or even a new normal.

But it's also possible (I guess this could be the essence of Rule#1's 'message') that sentimentals have outpaced fundamentals.

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@Cigarbutt Yeah, thats what i meant. The all-time high valuations are not compatible with the diminished revenue growth. Unless the Fed starts buying stocks upon Trump's urging.

 

@thepupil I just remembered i have subscribed to Sharadar data for the last few months with the intention of writing my own screeners. So going through the Russell 3000 or S&P 500 for the last quarter should be easy if i can find a few hours.

 

Yeah, i left out a few positive numbers such as MCD, INTC. Some media source or analyst might provide the revenue growth numbers for the S&P 500 for the latest quarter soon.

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SPX is at 21.3x PE. Since 1953, here are the quartiles using quarterly data. We are in between the 75% and the Max of 29.8.

 

We are not near all time high valuations using earnings. I know you like to use sales or GDP to normalize for corporations overearning, but I still think it's important to keep in mind that the SPX yields 4.7% in earnings in an environment where the 10 year is 1.7%. One doesn't need crazy growth to justify valuations; one also can't have precipitous declines like DOW or BA's earnings.

 

Why does the fed need to buy stocks for these valuations to be justified?

 

They are justified as long as they grow at inflation or so. they are justified by people/savers/institutions needing to preserve and growth their spending power through investment in equities.

 

Min 25% 50% 75% Max

0 1 2 3 4

7.15 13.3 16.9 19.0 29.8

 

Stocks for the long run!

 

by the way RNO, as you probably know, I consider it my duty to act as your bullish foil and this is all in good fun. it doesn't really affect how I invest (other than generally being comfortable taking a lot of equity risk. I wouldn't be if rates were 4 or 5% and we had similar valuations/growth. I can only invest in today's or tommorow's opportunity set and that points me to invest in stocks and real estate rather than cash or bonds. I am doing what the fed has told us to do for the past decade. I'm also 31 and a working net saver so my time horizon may be different than yours

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@thepupil

 

We were discussing CSX a few days ago. Today NSC reported and it looks just like CSX.

 

Revenues down 7%, operating income down 9%.

 

They took on more debt and bought back stock. Stock hit an all-time high today along with their debt of $11 B. EPS actually declined slightly but stock exploded upwards.

 

Yeah, our situations are probably different. I am looking to keep what i have, to paraphrase Munger, i can't go back to 'Go'.

 

SPX is at 21.3x PE. Since 1953, here are the quartiles using quarterly data. We are in between the 75% and the Max of 29.8.

 

We are not near all time high valuations using earnings. I know you like to use sales or GDP to normalize for corporations overearning, but I still think it's important to keep in mind that the SPX yields 4.7% in earnings in an environment where the 10 year is 1.7%. One doesn't need crazy growth to justify valuations; one also can't have precipitous declines like DOW or BA's earnings.

 

Why does the fed need to buy stocks for these valuations to be justified?

 

They are justified as long as they grow at inflation or so. they are justified by people/savers/institutions needing to preserve and growth their spending power through investment in equities.

 

Min 25% 50% 75% Max

0 1 2 3 4

7.15 13.3 16.9 19.0 29.8

 

Stocks for the long run!

 

by the way RNO, as you probably know, I consider it my duty to act as your bullish foil and this is all in good fun. it doesn't really affect how I invest (other than generally being comfortable taking a lot of equity risk. I wouldn't be if rates were 4 or 5% and we had similar valuations/growth. I can only invest in today's or tommorow's opportunity set and that points me to invest in stocks and real estate rather than cash or bonds. I am doing what the fed has told us to do for the past decade. I'm also 31 and a working net saver so my time horizon may be different than yours

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for the 4th quarter, revenue went from $2,896 to $2,690, a decline of $206 million, half of which can be attributed to a drop in coal revenues (which dropped by $94 million).

 

For the full year, revenue declined by $162 million and coal declined by $152 million. Operating income was flat. net income per share grew by 8% as they take in shares.

 

Cash paid for interest went from $496 to $555. They make $3.9 billion a year in operating profits and $2 billion in free cash flow (after interest). Even in 2009 this company generated $1 billion of net income and $500mm of free cash flow on $ 8 billion of revenue. that all time high debt seems more than manageable.

 

I don't think NSC is cheap. I wouldn't want to own it at 20x or whatever it is*, but does a decline in volumes driven by coal and commodities in a year in which coal continues its inevitable death and there was a trade war that likley affected agricultural commodities, indicate that the end of the economy is near? that's tough for me to conclude. NSC trades for 21.5x trailing relative to 17.6x average since 2000 and 18.6x over the past 5 years.  a bit toppish, sure? crazy? not in my view

 

Railway operating revenues of $11.3 billion declined 1 percent as overall volumes were down 5 percent, reflecting carload declines in all major commodity categories.

 

A common theme with the companies you are pointing out is links to petrochemicals or coal or other commodities: DOW, CSX, NSC, etc

 

*I do own BNSF indirectly for far cheaper via Berkshire

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I would encourage you to pay no attention to a cap weighted arbitrary collection of 30 companies.

 

Agreed. FWIW It's not even cap-weighted, it's share-price weighted. Any discussion involving this index is just total nonsense.

 

What's most fascinating is that such a badly constructed and limited index still tracks the SP500 pretty closely.

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The only thing that can justify the price movements is perhaps concluding that the market is now starting to realize rates will be forever low and thus rerating equities accordingly. Of course, this still kind of begs the question, do equities need to be expensive just because bonds are astronomically priced? The answer is probably yes, and its a powerful thing having pretty much all governments being buyers of debt to infinity. I guess as investors, we can only hope they never stop.

 

 

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Guest cherzeca

The only thing that can justify the price movements is perhaps concluding that the market is now starting to realize rates will be forever low and thus rerating equities accordingly. Of course, this still kind of begs the question, do equities need to be expensive just because bonds are astronomically priced? The answer is probably yes, and its a powerful thing having pretty much all governments being buyers of debt to infinity. I guess as investors, we can only hope they never stop.

 

there is an unholy alliance between sovereigns and banks.  sovereigns will bail out banks, but banks must buy sovereign debt, no matter how overvalued.  you can be old school and decry this unholy and irrational alliance, or new school and buy equities, I suppose. 

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Just for you RuleNumberOne

 

 

Caterpillar -1% seeing continued sales pressure

Jan. 31, 2020 7:12 AM ET|About: Caterpillar Inc. (CAT)|By: Yoel Minkoff, SA News Editor

Adjusted Q4 profit per share of $2.63, compared with $2.55 in the same quarter a year ago.

 

Sales by segment: Construction Industries -12%; Resource Industries -14%; Energy & Transportation -5%; Machinery, Energy & Transportation -9%.

 

"We expect continued global economic uncertainty to pressure sales to users in 2020 and cause dealers to further reduce inventories," said CEO Jim Umpleby. "We will continue to invest in services and expanded offerings to advance our strategy for long term profitable growth, while achieving our Investor Day targets."

 

Outlook for 2020: Profit per share of $8.50 to $10.00.

 

CAT -1.4% premarket

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Yeah, this shows the Fed is on the wrong track. They need to buy earth-movers from Caterpillar, airplanes from Boeing and chemicals from Dow. That would get them the inflation they want so badly without generating a debt-bubble.

 

The Fed has been making the wrong kind of asset purchases all these years.

 

 

Just for you RuleNumberOne

 

 

Caterpillar -1% seeing continued sales pressure

Jan. 31, 2020 7:12 AM ET|About: Caterpillar Inc. (CAT)|By: Yoel Minkoff, SA News Editor

Adjusted Q4 profit per share of $2.63, compared with $2.55 in the same quarter a year ago.

 

Sales by segment: Construction Industries -12%; Resource Industries -14%; Energy & Transportation -5%; Machinery, Energy & Transportation -9%.

 

"We expect continued global economic uncertainty to pressure sales to users in 2020 and cause dealers to further reduce inventories," said CEO Jim Umpleby. "We will continue to invest in services and expanded offerings to advance our strategy for long term profitable growth, while achieving our Investor Day targets."

 

Outlook for 2020: Profit per share of $8.50 to $10.00.

 

CAT -1.4% premarket

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  • 1 year later...

The Russell 3000 endured a 33% drawdown, then went up over 80% from there, and is up by 24% since this thread was started.

 

Market timing is hard.

 

Hope RuleNumberOne is doing well and compounding on the mid 50’s.

 

 

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