The Stock Tracking Guide is availab...

The Stock Tracking Guide is available to help investors recognize when a "growth" or "cyclical" company becomes over-priced (or under-priced).With this awareness, you can identify the time when a stock should be sold (or bought) to maximize profits. unimpaired details for using the Stock Tracking Guide are available in Chapter Eight of the Stock Selection Manual.

THE EXAMPLE

MD Health collection "A" shares have a particularly appropriate pricing history for illustrating in what way the Stock Tracking Guide helps identify when a expansion stock becomes over-priced.

First, MD was featured as a Stock To close attention in the March/April 1989 issue of the Canadian Shareowner. At that time, the greatest in quantity current, annual data available about MDS's return earnings per share ("EPS"), etc were for the company's 1988 fiscal year which closeed on October 31st, 1988. These data were ruminateed in the Stock Selection Guide accompanying the 1989 article. To avoid confusion later forward this Stock Selection Guide will be referr to as MDS's 1988 Stock Selection Guide.

Second at the time MD was studied, its "A" shares were trading at $1188 (adjusted for stock splits). Figure 1 illustrates the stock's high and reasonable price range during each fiscal quarter since then. (Figure 1 omitted) The stock reached a high price of $2275 during the fourth quarter of the fiscal year ending October 31 1991 Subsequently the stock drifted down to its passing from hand to hand $12-$13 range.

What a disappointment it would have been to have bought the stock in 1989 at about $12; watch it almost double within a link of years; and, then ride the stock down to your original purchase price.

Third, the accompanying Stock Tracking Guide for MD clearly indicates when an investor should have considered selling MDS's shares.

STARTING THE TRACKING GUIDE

The Stock Tracking Guide for MDS--as it would have been complet starting in mid-January 1989 and quarterly thereafter is available upon the next page. (Stock tracking guide omitted) Please seek information from the Stock Selection Manual for instructions onward completing Part 1.

THE DATA

Only the 1988 Section of Part 2 could have been complet in mid-January of 1989 because the first quarter outcomes for fiscal 1989 were not available. (MDS's first quarter completions on January 31st.)

Column 1 of the 1988 Section identifies the month-end for each of the company's four fiscal quarters.

Column 2 contains the Average Price Earnings ("P/E") ratio for the stock during the previous five fiscal years (i.e. 1984-1988) This average P/E (i.e. 192) was obtained from lonely dwelling 7 in Part 3 of the 1988 Stock Selection Guide.

Column 3 contains the record of MDS's quarterly EP (before unusual items) for each of the four quarters during the most-recently complet fiscal year; namely 1988

Note that public companies are allowed a maximum of 60 days following the fall of the curtain of a fiscal quarter to report unaudited, quarterly rises and 140 days to report audited annual conclusions Most companies do not effect a quarterly report for the fourth quarter.

Column 4 contains the aggregate amount of the latest four quarters of EP contained in round pillar 3. The numbers in this rounded pillar are also known as the "Trailing 4 Quarters of EPS"

Column 5 contains the Market Price for MDS's "A" shares at approximately the time that the quarterly EP data in rounded pillar 3 are disclosed to the public.

Column 6 contains the P/E ratio for the stock calculated by the agency of dividing the Market Price in line 5 by the Cumulative 4 Quarters of EP in line 4.

Column 7 contains the Tracking Ratio at the time the stock was studied in mid-January 1989; namely, 079 This Tracking Ratio eventuates from dividing the P/E ratio by means of the 5-year Average P/E ratio.

The foregoing data hall and calculations complete the 1988 section of the Tracking Guide.

UPDATING THE TRACKING GUIDE

As shortly as the company's EPS for the first quarter of fiscal 1989 were reported; namely, $010 this amount and the then-current share price were recorded in files 3 and 5, respectively in succession the first line of the 1989 section of Part 2 of the Tracking Guide. The updated Cumulative 4 Quarters of EP (i.e. $068) P/E ratio (173) and Tracking Ratio (090) were calculated and recorded.

Note that the updated Tracking Ratio of 090 and the Tracking Ratios for the 2nd and 3rd quarters of fiscal 1989 were all calculated using the 5-Year Average P/E ratio of 192 It takes a fiscal year for this Average P/E ratio to change.

In mid-January, 1990 an updated Stock Selection Guide was prepared to cast reproach the financial results for the fiscal year ending October 31 1989 This Stock Selection Guide contained an updated 5-Year Average P/E ratio of 197X (for the period 1985-1989) This updated Average P/E ratio was used to calculate the Tracking Ratio of 115 for the 4th quarter outcomes of fiscal 1989.

KEEPING TRACK

The foregoing course for keeping track of the putting out in a company's EPS--and the market's valuation of that growth--continued through every part of 1990 and 1991. Figure 2 illustrates the behaviour of MDS's Tracking Ratio to the completion of fiscal 1993. (Figure 2 omitted)