Quoting from Beating the Market by Charles Kirkpatrick CMT: "I use price-to-sales as a measure of value for two reasons. It was found by James O'Shaughnessy (What Works on Wall Street) to be the best relationship to future performance, and because sales numbers are the least likely to be manipulated by management. Price-to-sales seems to be the most easily considered readily available and accurate calculation of relative value."

Interestingly it is not the actual ratio that matters, i.e. low numbers are better than high numbers, but the ranking amongst all stocks.  If a stock has too low a price to sales ratio, i.e. below 10th percentile let’s say it may be indicating a problem with that stock and it should be avoided. Much like a dividend that is way too high may be reflecting a problem with that stock and should be avoided.

With that in mind I have calculated the Price/Sales ratio for each of the S&P 500 stocks.  This is pure price/sales and not ranking as of yesterday’s close.  The screen looks for S&P stocks selling for more than $10 and has sales greater than zero, giving us 407 of the 500 stocks in the index.

 I have set up an on-line Google Spreadsheet to share the price/sales data for this screen for all 407 stocks ordered from lowest to highest price/sales ratio! Feel free to download the data to your computer and sort as desired!

Have A Great Weekend!

A plethora of economic data this morning; Advance 4th Quarter Real GDP came in at -3,8% vs. a consensus of: -5.4% and the GDP price index +0.6% at vs. a consensus of +0.6%.  Employment cost index +0.6% vs. a consensus of: +0.7% simple quarterly rate. Shortly after the open at 9:45 is the NAPM-Chicago Consensus Forecast is: 34.0  and 10 minutes later at 9:55 AM Consumer sentiment Consensus Forecast: 61.9

With the exception of the Hang Seng oversears markets are mostly lower this morning: Nikkei 225 -3.12%, Hang Seng +0.94%, DAX -1.86%, and the FTSE 100 -0.95%.

Shortly after this morning economic reports the futures are: Dow +21, S&P +3, Naz +5, Oil +$0.55, and Gold +$15.80.

As the month draws to a close, barring some sort of miracle, January will be a down month.  The adage goes “As January goes so does the year”.  How good is this barometer? Looking back 45 years on the S&P-500, 34 times or 75% of the time as January went so did the year.  That’s not a bad record. 

Of course the directional move in January gives a leg up to the barometer.   If we average the gains/losses of all years in which the January barometer was correct, i.e. if January was up, the year was up and if January was down, the year was down, we get an average gain over the 34 times it was correct of 6.54%.  If we subtract January’s gain/loss from the annual return and average all the correct years we return 4.63%, in other words almost 1/3 of the annual move occurred in January on average.

The 25% of the time the market went opposite the return in January the overall average return was 4.16% but if we take out January’s move the return was 6.25%.  January’s move on average plays a big part in the overall annual returns.