Weekend reads: Santa could arrive early for equity investors

How can you gain an advantage over other investors? Watch when insiders use their own money to buy shares in their company. It could be a sign of better times to come.

Michael Brush believes the market weakness due to the omicron strain of the coronavirus is overstated and that this massive insider share purchase of these 10 companies signals a “Santa Claus” rally for the stock market.

DocuSign, Tesla, Amazon and high P / E ratios

The importance of price / earnings valuations for stocks is a subject of ongoing debate. The forward P / E ratio of the benchmark S&P 500 Index SPX,
was 20.9 at the close on Dec. 2, based on weighted consensus estimates among analysts polled by FactSet. It was pretty high – the average term P / E for the index has been 18.7 for the past five years and 16.8 for 10 years.

But some stocks of fast growing companies are trading at much higher valuations. In the case of Amazon.com Inc. AMZN,
P / E ratios have averaged 101.7 over the past 20 years and are now valued at 67.5 times future earnings, with investor confidence coming from a rapid and continuous increase in income.

But any hint of slowing sales can send a highflier down.

Shares of DocuSign Inc. DOCU,
were trading at a futures P / E valuation of 106.3 when the market closed on December 2nd. The stock plunged to 40% at the start of December 3.

The company reported adjusted earnings and sales for its fiscal third quarter ended Oct. 31 that were higher than analyst consensus estimates. So what was the problem? DocuSign CEO Don Springer said after six quarters of “accelerated” sales growth, his customers had returned to “more standardized purchasing models.” The company’s billings – not sales, but future contract sales – were lower than expected.

The sensitivity of high P / E stocks to indications of slower growth is one reason Tesla Inc.’s TSLA,
the stock is controversial, trading at a futures P / E of 131.7. Gary Black explained why he still thinks the shares of the electric car maker are a good buy.

More coverage from DocuSign and Tesla:

The bitcoin bank

Terrence Horan, Dow Jones

No, that’s not its real name – the first federal charter for a bank focused on digital assets was delivered to Anchorage Digital Bank in January. Frances Yue interviewed CEO Nathan McCauley, who shared a fascinating prediction about the financial industry.

Want the most important information on cryptography and DeFi? Sign up for Frances Yue’s Distributed Ledger column.

Other cryptographic cover:

How people think about where to live

MarketWatch photo illustration / iStockphoto

Women and men often want the same things when it comes to deciding where to live, however, their preferences may vary when it comes to choosing cities. Amanda Weinstein, Associate Professor of Economics at Akron University and Lockwood Reynolds, Associate Professor of Economics at Kent State University, share their research findings on these different thought patterns.

Should we be careful when investing for retirement?

Buying and holding stocks is associated with building a retirement nest egg, but Brett Arends is looking at momentum strategies that can lead to better returns.

A quarrel for a house

Jacob Passy writes The Big Move column, which discusses housing issues. This week, he helps a reader who asks him if she has “squatter rights” to a house she has lived in for 30 years, when her ex-husband is a half-owner who wants to sell the property.

A holiday warning

MarketWatch photo illustration / iStockphoto

Many retailers offer buyers “buy now, pay later”, often with terms that appear to be free. But you better not assume that you know all the pitfalls. Katherine Wiles examines different types of offers and describes how easy it is for buyers to go over their heads.

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