Reasons for Global Food Crisis/Riots/Shortages. Can we Profit from Trend?

In many parts of the world, there are food riots as the price of rice has gone up to painful levels. What are the reasons behind this and how can we profit and play this trend?

According to Raj Patel, author of Stuffed and Starved: The Hidden Battle for the World Food System, there are five main reasons for the high food prices:

1. Food production is heavily dependent on fossil fuel and oil prices are soaring.
   
2. Biofuel production is boosting prices.
   
3. As nations get richer, they demand more meat, shifting grain "out of the bowls of the poorest people into the stomachs of livestock."
   
4. Poor harvests may be the front end of climate change.
   
5. Speculation on food prices fuels spikes.
   

Soaring oil prices are a main reason as food production is dependent on fossil fuels. In addition, higher fossil fuels encourage alternative energy solutions which includes biofuel production such as ethanol. Rather than providing food for people, fields are being used to produce biofuels such as ethanol. Some people have criticized subsidies for ethanol for encouraging hunger and global warming.

In addition, as the global boom continues, and as nations get richer, nations start preferring more meat. According to worldwatch.org, it takes an estimated five pounds of grain to produce a single pound of beef.

There is also a growing trend as the global food crisis continues where countries with a surplus, such as China, Cambodia and Egypt, have imposed policies that discourage outflow of surplus rice to conserve supplies for domestic consumption. According to an article by Lala Rimando, some exporting countries are holding on to their stocks waiting for the time to unload when prices go further up.

How do we play this Trend?

The most direct way continues to be the agriculture plays. Companies such as Monsanto (MON), the biotech of seeds, Potash (POT), the fertilizer company, and Deere (DE), the farm equipment company, stand to profit.

This trend will most likely continue to be a multi-year trend, and the agriculture sector appears to be a good play.

What about Fast Foods and Restaurants?

Demand for meat will increase, but that also means that the cost of food and meat will increase. But what will rise faster? Demand or the cost of the underlying food product? Let us wait and see what will happen.

Health Foods?

Some people propose and suggest that people go vegetarian because of this crisis.

But will this be a widespread phenomenon?

It would be a good idea to keep track of the health food companies, companies such as Hain-Celestial (HAIN) and Whole Food Markets (WFMI). In general, people will start to be more health conscious and this is good for the health food companies.

Your Ideas

Do you have any stock ideas or thoughts on this long term trend? Please do comment.

Is the U.S. Penny Worth More as a Metal (Copper, Zinc) than as US Currency?

With metal prices rising rapidly, people on television and radio often comment that a U.S. Penny is worth more as a metal than its value in the US as a unit of currency.

How true is this?

Many people notice that a penny is (mostly) copper and they see copper prices rising rapidly. Is the Penny mostly made out of copper?

Material Composition of a Penny

Each year, the composition of the U.S. Penny could vary from time to time. For the most part, before 1982, the U.S. Penny weighs 3.1 grams, and is made out of 5% zinc and 95% copper. After 1982, the U.S. Penny weighs 2.5 grams, and is made out of 97.6% zinc and 2.4% copper.


Current Price of Zinc and Copper

Currently, as of April 24, 2008, using a Cash basis, the price of copper is $8.701/KG, and the price of zinc is $2.220/KG.

Calculating the Value of the Penny Based on Value of Material

Calculating the value of each, we find the value of each type of U.S. Penny:

1. Pre-1982 Penny: 2.5968545 cents
   
2. Post-1982 Penny: .593886 cents

Answer to our Initial Question

So is the U.S. Penny really worth more as a metal than as U.S. Currency? It depends on the edition of the U.S. Penny. For the most part, pre-1982 Pennies are worth 2.59 cents each! That exceeds the value of the U.S. Penny (1 cent) by more than 2 times!

However, if we look at the cost of the post-1982 U.S. Penny, the value of the metals is currently equivalent to .59 cents, currently less than 1 cent.

Is the Penny Obsolete?

But if we add the cost of producing the U.S. Penny, even the post 1982 edition of the Penny, the total cost (cost of producing plus price of the metals) could exceed the value of the coin itself (1 cent as US Legal Tender).

Many law makers have been proposing to make the U.S. Penny Obsolete because of this.

Melt a Penny and Sell the Material? That's Illegal

If you are having thoughts of melting a pre-1982 US Penny and selling the raw material, you have to know that there is a law against that.

Calculation Assumptions

1. 1 KG = 1000 g
   
2. Zinc = $2.220 / KG
   
3. Copper = $8.701 / KG
   
4. pre-1982 Penny: 3.1 grams, 5% zinc, 95% copper
   
5. post-1982 Penny: 2.5 grams, 97.6% zinc, 2.4% copper
   

Calculations

Pre-1982 Penny = (3.1g) (.05 zinc) (1 KG / 1000g) ($2.220 / KG) +
(3.1g) (.95 copper) (1 KG / 1000g) ($8.701 / KG)
= $.0003441 + $.025624445 = $.025968545
= 2.5968545 cents

Post-1982 Penny = (2.5g) (.976 zinc) (1 KG / 1000g) ($2.220 / KG) +
(2.5g) (.024 copper) (1 KG / 1000g) ($8.701 / KG)
= $.0054168 + $.00052206 = $.00593886
= .593886 cents

Books of Jim Cramer, Host of CNBC Show "Mad Money"

Are confused about the Books of Jim Cramer, host of the popular finance CNBC show, "Mad Money"?

Here's an overview of the books.

1. 
   
   
   "Real Money: Sane Investing in an Insane World" is the book that Jim Cramer gave his hedge fund employees, when he was running a hedge fund. If you are a sophisticated investor and stock picker or wish to head towards that direction, this is the book for you. Jim Cramer has written down what he knows about the stock market.
   
   The Book includes sections on investing basics, spotting tops and bottoms, investing rules, creating your discretionary portfolio, and the popular business cycle/sector rotation chart.
   
   There is even a chapter on options and some advanced speculating techniques that Jim Cramer (most likely) intentionally left out in other books.
   
   Some would consider this book Jim Cramer's "Magnum Opus".
   
   
2. 
   
   "Real Money: Sane Investing in An Insane World" was a very good book. However, the book sometimes went over the heads of some people.
   
   Jim Cramer (along with nephew Cliff Mason), decided to write a book similar to "Real Money", but wrote it in a manner more accessible to more people. Chapters include ways to buy a stock Mad Money Style including "Knowing Yourself and Your Goals", lessons on how to do your stock picking homework, and how to buy using limit orders and buying incrementally.
   
   Jim Cramer also writes about selling stocks the right way and gives insight on how to watch Mad Money, from some behind the scenes insight on the "Lightning Round", information on how to watch the CEO interviews, new lessons learned including some buy and sell rules, background on how Jim Cramer Picks stocks on the show, and more behind the scenes "Mad Money" commentary.
   
   There is also an update of the popular Cyclical Investing Chart in the "Real Money" book.
   
   Since this book was intended for a wider audience, Jim Cramer does not include a section on options and advanced speculating techniques.
   
   If your first introduction to Jim Cramer is through the Mad Money show, and if you wish to pick individual stocks, perhaps this book should be the first "Jim Cramer" book to buy and read.
   
   Once you outgrow "Mad Money: Watch TV, Get Rich", you can purchase the "Real Money: Sane Investing in an Insane World" book.
   
   
3. 
   
   Both books, "Real Money" and "Mad Money" focused on individual stock picking.
   
   But to have an even wider audience, Jim Cramer (with Cliff Mason) decided to write "Jim Cramer's Stay Mad For Life: Get Rich, Stay Rich (Make Your Kids Even Richer)."
   
   "Stay Mad for Life" is more of a personal finance book and talks about 401k plans, retirement plans and even mutual funds (he does not talk much about mutual funds on his "Mad Money" CNBC show). He talks about budgets, credit card debt and following a budget and dealing with health insurance. Jim Cramer also writes about family finance and talks about getting children interested in investing.
   
   If you want to read a book from Jim Cramer focusing mainly on Personal Finance, this is the book to get.
   
   If you are interested in more in depth individual stock picking information, choose either "Real Money" or "Mad Money" books.
   
   
4. 
   
   If you wish to read Jim Cramer's fascinating autobiography, "Confessions of a Street Addict" by Jim Cramer, is the book to purchase. Read how Jim Cramer went from rags to riches and read stories about how he lived in a car for some time. He also mentions his experience during the infamous market capitulation of 1998, and the way he treated others in pursuit of the next trade.
   
   This book could become a compelling movie. Jim Cramer, on one of his Mad Money shows mentioned that some studio was thinking of making the book into a movie but Jim Cramer declined because they would have portrayed Jim Cramer as a bad guy, similar to Michael Douglas' character Gordon "Greed is Good" Gecko in the 1987 movie, Wall Street.
   

There are other products as well such as the "Mad Money" DVDs:

1. Mad Money with Jim Cramer - Back to Basics
   
2. Mad Money w/ Jim Cramer Back To Basics II: Invest Like A Pro
   

Current (April 17, 2008) Cheap Growth Ready to Breakout Stocks. Hanes Brands (HBI) is on the List.

Recently, we revisited the Cheap Growth Ready to Breakout Screen. We've looked at the results of several portfolios:

1. September 12, 2007 to April 11, 2008
   
2. Results of Three Portfolios Checked on April 15, 2008.

So what are the current stocks in the Cheap Growth Ready to Breakout Screen?
Stocks are sorted from Highest to Lowest Market Capitalization:

The Current Stocks in Cheap Growth Ready to Breakout Screen

Ticker	Company	5 yr. Growth	Fwd PE
RTP	Rio Tinto	35	14.58
AMX	America Movil	29.67	14.53
RIG	Transocean	36.67	9.17
WFT	Weatherford Intl	21	14.44
FMX	Fomento Economico	20	17.05
NE	Noble Corp	25.88	7.91
LLL	L-3 Comm	21.24	15.26
ESV	Ensco Intl	20.53	7.89
FTI	FMC Technologies	23	19.76
AKS	AK Steel	20	16.27
CLR	Continental Resources	41.4	16.55
BUCY	Bucyrus	31	18.53
MEE	Massey Energy	29.88	16.48
SPN	Superior Energy	26.75	9.06
ATW	Atwood Oceanics	33.5	10.37
HBI	Hanes Brands	22.5	12.01
EGO	Eldorado Gold	100	18.26
WHQ	W-H Energy	20	13.63
CRK	Comstock Resources	31.65	15.39
SFY	Swift Energy	30.33	7.34
PETD	Petroleum Dev	20	17.62
TTES	T-3 Energy Services	81.25	15.36
MEA	Metalico Inc	43	13.04
NCIT	NCI Inc	21	15.59

All these stocks have a growth rate greater than their forward PE, and their forward PE is less than 20.

What sectors are the stocks in?

Many of the stocks in the list above are in the commodity sector including oil, energy, steel, and gold. Commodities continue to appear strong.

AMX, an emerging market wireless telecom company, appears to remain a good growth play.

International Markets remain strong. AMX, the Mexican and South America play is on the list, as well as the beer and beverage maker FMX, Fomento Economico.

Hanes Brands??

A surprising entry in this list is Hanes Brands (HBI), a retail play.

As of April 17, 2008, the stock looks like it is breaking out.

Hanes earnings call is scheduled for Monday April 21, 2008.

According to a Barrons Blog:"HANESBRANDS CLEANS UP
The affirmative news in the Hanesbrands (HBI) (besides the fact that macro economic conditions don’t really determine the need for undergarments) story: cotton prices have traded in patterns distinct from other agricultural commodities. In fact, after cotton, which for much of this year was keeping pace with the bulge in farm products, reached its high last month, the commodity has sold off to the tune of about 16%. In addition, the company’s largest customer is Wal-Mart (WMT), as Credit Suisse noted in a research report Tuesday, and Wal-Mart has proved to be one of the more resilient names in the retailing sector, which limits the risk Hanesbrands has to slower retailing traffic. The firm also said the company’s efforts to restructure its costs hasn’t been reflected in the balance sheet. All that suggested there could be some upside in shares, despite the 40% improvement off the January lows, which have carried the stock to within pennies of its highs for the last year."

Hanes Brands (HBI) might be worth looking into.

Results of 3 Portfolios: Cheap Growth Ready to Breakout (April 15, 2008)

In a previous article, we described the Cheap Growth Ready to Breakout Screen.

In this post, we will continue to track the performance of three portfolios. We are taking the snapshot as of Tuesday, April 15, 2008. We previously had a snapshot on July 17, 2007.

==============================
Portfolio 1: February 23, 2007
==============================

#	Symbol	Start	End	Return
1	AMX	46.89	64.06	36.62%
2	TSM	10.91	10.36	-5.04%
3	VIP	17.04	31.34	83.92%
4	IPR	73.35	83.65	14.04%
5	AYE	47.64	52.40	9.99%
6	WCRX	15.15	17.48	15.38%
7	BRP	41.40	76.50	84.78%
8	SCS	17.24	10.80	-37.35%
9	MLHR	39.16	22.47	-42.62%
10	AIR	30.61	20.80	-32.05%
11	GRT	25.53	11.94	-53.23%
12	DVR	12.49	11.95	-4.32%
13	TGI	54.92	55.15	0.42%
14	CRAI	53.88	32.36	-39.94%
15	TLF	7.99	2.75	-65.58%
16	APH	33.85	41.08	21.36%
17	GIL	26.80	33.63	25.49%
18	MIDD	58.88	61.90	5.13%

Total 0.94%

SPY 141.96 133.24 -6.14%
IWM 81.44 69.01 -15.26%
EFA 74.77 73.31 -1.95%

===========================
Portfolio 2: March 14, 2007
===========================

#	Symbol	Start	End	Return
1	TSM	10.60	10.36	-2.26%
2	DISH	38.26	30.49	-20.31%
3	WFR	55.05	72.28	31.30%
4	ASX	4.98	5.03	1.00%
5	SPIL	8.73	8.73	0.00%
6	BRP	41.75	76.50	83.23%
7	LAUR	59.28	61.95	4.50%
8	KSU	33.65	40.54	20.48%
9	BEAV	30.73	34.01	10.67%
10	CVO	24.50	9.94	-59.43%
11	IART	43.45	41.65	-4.14%
12	KNL	22.39	10.94	-51.14%
13	AIR	30.25	20.80	-31.24%
14	MYE	17.63	12.08	-31.48%

Total -3.49%

SPY 136.08 133.24 -2.09%
IWM 76.72 69.01 -10.05%
EFA 71.02 73.31 3.22%

=========================
Portfolio 3: May 16, 2007
=========================

#	Symbol	Start	End	Return
1	ESV	58.35	65.00	11.40%
2	RIG	90.43	149.30	65.10%
3	TDW	64.24	57.44	-10.59%
4	KB	93.35	66.57	-28.69%
5	FCX	70.25	105.50	50.18%
6	VLO	71.62	48.56	-32.20%
7	NBG	11.33	10.14	-10.50%
8	ACGY	21.16	25.50	20.51%
9	AYR	33.27	12.85	-61.38%
10	FTI	36.84	66.17	79.61%
11	HXM	62.29	61.50	-1.27%
12	SZE	57.58	68.75	19.40%
13	SLB	75.86	91.13	20.13%
14	CLB	92.77	137.91	48.66%
15	CKR	20.08	11.04	-45.02%
16	CEPH	80.14	62.67	-21.80%
17	TDK	86.09	62.72	-27.15%
18	SNDA	26.65	26.44	-0.79%
19	LKQX	12.15	20.11	65.51%

Total 7.43%

SPY 148.71 133.24 -10.40%
IWM 81.06 69.01 -14.87%
EFA 78.14 73.31 -6.18%

The Results

SPY represents the S&P 500 ETF, IWM represents the small cap Russell 2000 ETF, and EFA represents the Developed International ETF.

Looking at all three portfolios, the Cheap Growth Ready to Breakout Screen outperformed:

1. Outperformed the S&P 500 in 2/3 portfolios with an average outperformance of 7.84%
   
2. Outperformed the Russell 2000 in 3/3 portfolios with an average outperformance of 15.02%
   
3. Outperformed the EFA in 2/3 portfolios with an average outperformance of 3.26%
   

Notes

1. Prices used are the adjusted prices based on Yahoo Finance. Price is adjusted based on splits and dividends.
   
2. LAUR (Laureate Education) no longer trades as LAUR. The last known price is used.
   
3. GSF (Global Santa Fe) merged with Transocean (RIG). The RIG stock price is used here.
   

Outperforming Portfolio Since September 2007 Using Cheap Growth to Breakout Screen

Sometime back, we created a (buy and hold) portfolio on an online site using our Cheap Growth Ready to Breakout Screen.

Many months later, after the S&P 500 declined 9.42% from September 12, 2007 to April 11, 2008, we checked the portfolio and discovered that the portfolio even during the market decline increased by 2.21% outperforming the S&P 500 and even posting a gain!

The Portfolio

Here is the Portfolio. We tried evenly weighting each position, but weighting could vary.

Stock	Current	Bought	Return
ACGY	$24.20	$27.77	-13.18%
AMX	$62.65	$64.10	0.39%
ATW	$99.61	$78.59	26.49%
BEAV	$35.80	$44.45	-20.82%
CAM	$45.71	$43.40	5.07%
CEO	$158.77	$130.71	21.21%
CHK	$47.60	$37.60	26.35%
CHL	$81.40	$65.99	23.1%
CLB	$131.40	$110.01	19.18%
DWSN	$72.16	$76.39	-5.79%
ESL	$55.30	$50.98	8.22%
FTI	$61.81	$51.53	19.7%
GIGM	$15.30	$15.74	-3.05%
HLX	$32.53	$45.65	-29.58%
HRS	$48.69	$59.90	-18.71%
KNDL	$43.68	$39.02	11.69%
NNDS	$46.51	$56.50	-18.02%
NOV	$67.48	$67.99	-1%
NTG	$42.85	$50.78	-15.87%
NWK	$5.77	$12.55	-54.28%
OIIM	$8.03	$14.49	-44.83%
OTEX	$33.50	$26.04	28.39%
SGP	$17.21	$32.48	-47.23%
SII	$67.77	$69.33	-2.35%
SXE	$24.54	$22.01	11.24%
VIP	$31.15	$25.59	21.48%
WHQ	$72.54	$69.59	3.99%

Overall Results

Period: September 12, 2007 to April 11, 2008:

1. S&P 500 Return: -9.42%
   
2. This Portfolio: 2.21%

Cash Percentage (Portfolio): 5.7%

The Stocks and Sectors

Stock	Name	Sector
ACGY	Acergy	Oil and Gas
AMX	America Movil	Central and South American Telecom
ATW	Atwood Oceanics	Oil and Gas
BEAV	B.E. Aerospace	Aerospace and Defense
CAM	Cameron International	Oil and Gas
CEO	CNOOC	Chinese Oil and Gas
CHK	Chesapeake Energy	Oil and Gas
CHL	China Mobile Ltd	Chinese Telecom
DWSN	Dawson Geophysical	Oil and Gas
ESL	Esterline Technology	Aerospace and Defense
FTI	FMC Technologies	Chemicals: Agriculture, Industrial, Specialty
GIGM	GigaMedia Ltd	Chinese Online Game and Internet Services
HLX	Helix Energy	Oil and Gas
HRS	Harris Group	Industrial Communication Systems
KNDL	Kendle International	Clinical Research
NNDS	NDS Group	Broadcast and Digital TV Equipment
NOV	National Oilwell Varco	Oil and Gas
NTG	Natco Group	Oil and Gas
NWK	Network Equipment	Telecom Equipment and Networking
OIIM	O2Micro Int'l	Semiconductors
OTEX	Open Text	Enterprise Content Manager Systems: Tech
SGP	Schering-Plough	Pharma
SII	Smith International	Oil and Gas
SXE	Stanley	Information Equipment for Defense and Gov't
VIP	Vimpel Communcations	Russian (Wireless) Telecom
WHQ	W-H Energy Services	Oil and Gas

Comments on Sector

A large part of the outperformance is due to overweighting the Oil and Gas sector, which continues to be a hot sector.

Other popular sectors on the portfolio are the Emerging Market Telecom plays, Aerospace and Defense, and select Tech and Pharma companies.

Results of Russian and Eastern Europe Mad Money Tour

Last week, on the CNBC hit show Mad Money, Jim Cramer, the host of the show went through one Russian or Eastern European Stock per week. The results:

1. Michel Steel (MTL)
   
2. Wimm Bill Dann Foods (WBD), a Russian Dairy, Juice, Water and Baby Products Producer.
   
3. CTC Media (CTCM), a Russian Television Network Operator
   
4. Central European Distribution (CEDC), best known for Polish Vodka.
   
5. Central European Media Enterprises (CETV) invests, develops, and operates Television stations in Eastern and Central Europe.
   

Before Wednesday's show, this blog attempted to guess the three remaining stocks Jim Cramer would choose on his show that week.

Here are the Perfect Matches. We were correct on:

1. CEDC
   
2. CETV

We missed CTCM. CTCM and CETV are too similar.

What was missing was Russian and Eastern European Telecom. We still say that Vimpel Communications (VIP) is a good choice for the region. Emerging Market Telecom is a growth area.

Russian and Eastern European Stock Tour by Jim Cramer on CNBC Show "Mad Money"

This week on the CNBC Show "Mad Money", ex-hedge fund manager Jim Cramer, host of the show, is recommending Eastern European or Russian Stocks, one stock each day of the week.

On Monday, Jim Cramer recommended Michel Steel (MTL), a steel company.

On Tuesday, Jim Cramer recommended Wimm Bill Dann (WBD) a dairy and juice producer.

Can we guess the other three companies?

There aren't that many Russian stocks which sell as ADRs (American Depository Receipts), and Mad Money can't recommend stocks on the "pink sheets".

First Guess

Jim Cramer will recommend a telecom company. Candidates include Mobile TeleSystems (MBT), Rostelcom (ROS), Golden Telecom (GLDN) and Vimpel Communications (VIP).

My first guess would be Vimpel Communications (VIP) and possibly Mobile TeleSystems (MBT) because of the wireless growth.

Second Guess

Eastern European companies are under consideration.

My second guess would be Polish Vodka company, Central European Distribution (CEDC).

Third Guess

Another Eastern European company worth considering is Central European Media Enterprises (CETV). Growth in this area should be great.

Fourth Guess

A Natural Resources Company would be my fourth guess. There are many Russian resource companies such as Lukoil and Gazprom, and Norilsk Nickel (world's top producer of Nickel), but they sell on the "pink sheets".

Historic S&P 500 PE Ratio, Dividend Yield and Total Return 1960 to 2007

Year	PE Ratio	Dividend Yield	S&P 500 Return	Total Return
1960	18.73	3.41%	-3%	0.41%
1961	21.23	2.85%	23.13%	25.98%
1962	17.21	3.40%	-11.81%	-8.41%
1963	18.15	3.13%	18.89%	22.02%
1964	17.79	3.05%	12.97%	16.02%
1965	17.45	3.06%	9.06%	12.12%
1966	14.84	3.59%	-13.09%	-9.50%
1967	17.67	3.09%	20.09%	23.18%
1968	18.15	2.93%	7.66%	10.59%
1969	15.08	3.52%	-11.36%	-7.84%
1970	16.72	3.46%	0.10%	3.56%
1971	18.32	3.10%	10.79%	13.89%
1972	19.12	2.70%	15.63%	18.33%
1973	12.25	3.70%	-17.37%	-13.67%
1974	7.33	5.43%	-29.72%	-24.29%
1975	11.70	4.14%	31.55%	35.69%
1976	11.03	3.93%	19.15%	23.08%
1977	8.75	5.11%	-11.50%	-6.39%
1978	8.26	5.39%	1.06%	6.45%
1979	7.42	5.53%	12.31%	17.84%
1980	9.06	4.74%	25.77%	30.51%
1981	8.07	5.57%	-9.73%	-4.16%
1982	10.17	4.93%	14.76%	19.69%
1983	12.41	4.32%	17.27%	21.59%
1984	9.93	4.68%	1.40%	6.08%
1985	13.48	3.88%	26.33%	30.21%
1986	16.78	3.38%	14.62%	18.00%
1987	15.41	3.71%	2.03%	5.74%
1988	12.20	3.68%	12.40%	16.08%
1989	14.71	3.32%	27.25%	30.57%
1990	15.20	3.74%	-6.56%	-2.82%
1991	21.83	3.11%	26.31%	29.42%
1992	24.04	2.90%	4.46%	7.36%
1993	23.53	2.72%	7.06%	9.78%
1994	16.98	2.91%	-1.54%	1.37%
1995	17.42	2.30%	34.11%	36.41%
1996	20.70	2.01%	20.26%	22.27%
1997	24.51	1.60%	31.01%	32.61%
1998	32.15	1.32%	26.67%	27.99%
1999	32.57	1.14%	19.53%	20.67%
2000	25.38	1.23%	-10.14%	-8.91%
2001	25.97	1.37%	-13.04%	-11.67%
2002	18.62	1.83%	-23.37%	-21.54%
2003	20.53	1.61%	26.38%	27.99%
2004	18.08	1.60%	8.99%	10.59%
2005	18.28	1.79%	3.00%	4.79%
2006	17.30	1.77%	13.62%	15.39%
2007	16.78	1.89%	3.53%	5.42%

Total Return equals the S&P 500 Return plus the Dividend Yield that year.

Table above uses some raw data from Aswath Damodaran at Stern Business School. Aswath got the data from Bloomberg and Standard And Poors.

Forward Stock Market (S&P 500) Return Based on Distance from 52 Week High

What is the One Year Forward Return of the S&P 500 (from 1/1/1950 to 3/31/2008) when we are some distance away from the 52 Week High?

If the S&P 500 is 10% or more below the 52 week high, the average return during the 1950 to 2008 period, is around 11.72%, compared to 8.30% if the S&P 500 is within 10% of the 52 week high.

If we go further down to 20% or more below the 52 week high, the S&P 500 one year forward return goes up to 15.75%.

At 30% below the 52 week high, the one year forward return increases to 23.58%.

At 40% below the 52 week high, the average one year forward return is a whopping 31.28%.

So the pattern appears to be true:

The further we are below the S&P 500 52 week high, the better chances we have of having a better than average one year forward return.

If the Index loses 10%, we consider this a correction. If the index loses 20%, we often call this a bear market.

Today's S&P 500 Index Value

As of April 3, 2008, the S&P 500 is 1369.31, and the 52 week high is 1576.09.

This means that the S&P 500 is currently around 13% below the 52 week high.

While a greater percentage below the 52 week high would be ideal, 13% below the 52 week high is not bad, if we wish to invest for at least one year or more.