Donaldson Capital Management Webcast - Dividend Valuation Model: Greg Donaldson explains the firm’s proprietary Dividend Valuation Model using Procter and Gamble as an example.
Donaldson Capital Management Clients and Principals own Procter and Gamble.
Wednesday, July 28, 2010
Stocks are Cheap and Here's Why
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3 comments:
Of course, I love the methodology. Can't help it. But, what did these models look like in the 1970's, the 1930's??
There is little one can argue against "stocks being cheap", but what we need to know is whether there have been sustained periods of time when stocks were cheap in terms of your model.
I ask this because there are those who have similar models that have been calling large quality stocks cheap for a number of years, yet they've remained cheap still. So is it not possible for something to be cheap and remain cheap for several years in a row?
Bill Miller recently said that the top names in the S&P500 were at generational low values. I expect, on the basis of your comments, that you'd more or less agree with that?
I was wondering what you thought of Johnson & Johnson's value; whether it was falling into the same undervalued basket you are generally seeing right now?
Thanks.
Jay Walker
Confused Capitalist
"So is it not possible for something to be cheap and remain cheap for several years in a row?"
Definitely. Look at the chart from 90-96. Just because Greg calls the stock cheap doesn't necessarily mean it won't continue to get cheaper. It seems to me Greg is saying, I think the stock is cheap, we think it is a strong company that continued to grow earnings in a sustainable manner, so we will continue to purchase the stock because it's undervalued and are confident that the income stream will continue from increased dividends.
With this stock, I think cheaper means better buying opportunity and better yield on cost.
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