Specializing in equity research, securities valuation, and financial education
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Specializing in equity research, securities valuation, and financial education
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JLG Research estimates the intrinsic value of Dow 30 stocks (among other stocks/indexes) and combines estimates of fundamental value into a composite index. We use a proprietary economic profit approach to estimate the intrinsic value of Dow components. In construction of our EVA-based fundamental indices, we do not allow a stock to deviate more than 20% of its actual market price. This practical constraint on DCF (discounted cash flow) deviations is due to our recognition of possible model misspecification of a company's normal operating environment (cycle) and/or efficient market considerations. The pioneering EVA approach to securities analysis and equity portfolio management is described in our published articles (e.g., The EVA Style of Investing, Abate, Grant, and Stewart, Journal of Portfolio Management), contributed chapters, and books. Our equity analysis results in five tables on Dow 30 stocks and the composite index. These include (1) buy-sell recommendations, (2) stock ratings (scale 1 to 5), (3) breakdown of intrinsic value into current and future growth opportunities, (4) "Dow Fundamental" (featured below), and (5) Dow "hedge". A "bottoms up" EVA analysis of Dow stock from March 2006 (initiation) to March 2007 produced the following back-test results for JLG Dow Fundamental:*
_______________________________________________ *DISCLOSURE: JLG Research valuation of Dow 30 and its components is provided for informational purposes only. This research is not intended to serve as investment advice or a solicitation of an offer to buy or sell securities. JLG Research and its associates may take positions in Dow 30 stocks (among others) and derivative securities that track stocks and/or a composite index. Contact your legal, accounting, and/or financial advisor for professional advice when making investment decisions. Past performance is not a guarantee of future results. Investors should be aware that discounted cash flow (DCF) estimates of intrinsic value are based on company fundamentals (accounting/economic data) and can differ widely from actual observed market prices. JLG Research uses well-known data sources deemed reliable (among its estimates and models), but does not guarantee accuracy of data or results. EVA® is a registered trademark of Stern Stewart & Co. The Dow® is a registered service mark of Dow Jones and Company. ©2007 JLG RESEARCH All Rights Reserved
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