This is a question which is talked about quite a lot nowadays. Jukka Oksaharju wrote a great article about this and this is a summary about it and my comments about the topic. I will put the direct link to post in the end of text, but Jukka's blog is written in Finnish.
First warning sign and the most important for me is if the company cuts its dividend. This is always mark of something serious, even more serious if the company is known of paying increasing dividends.
Second warning sign is the decreasing revenue and company loses its market share. This a mark of company products are going out of fashion and people are buying their products from competitors.
Third warning sign is if the company cuts its R&D expenses and leaders start to sell their stocks. Like Jukka said in his blog the cutting of R&D costs in a company like Coca-Cola is not a problem because this is so called "timeless" product, but this is a warning sign in a company which is acting in more cyclical markets and life-cycle of the products is max 25 years.
Fourth warning sign is if the P/E value of the company is much higher level than normally. This is what happened in Tech. crash in the beginning of this century.
And last warning sign in my list is if the company lay off it's personnel and still the profits are not increasing and the company does not win any market share from the competitors.
So as a summary, are we leaving a bubble or not? My opinion is that we are not. If we think a about in which cycle we are, I think we are somewhere in the middle in Europe and North America is about one or two year(s) ahead of us. This is clearly seen in company valuations Europe vs. North America.
Please leave a comment what you think.
Regards,
CVM
Link to Jukka's: blog: http://www.nordnetblogi.fi/kymmenen-varoittavaa-merkkia-porssissa/20/02/2017/
First warning sign and the most important for me is if the company cuts its dividend. This is always mark of something serious, even more serious if the company is known of paying increasing dividends.
Second warning sign is the decreasing revenue and company loses its market share. This a mark of company products are going out of fashion and people are buying their products from competitors.
Third warning sign is if the company cuts its R&D expenses and leaders start to sell their stocks. Like Jukka said in his blog the cutting of R&D costs in a company like Coca-Cola is not a problem because this is so called "timeless" product, but this is a warning sign in a company which is acting in more cyclical markets and life-cycle of the products is max 25 years.
Fourth warning sign is if the P/E value of the company is much higher level than normally. This is what happened in Tech. crash in the beginning of this century.
And last warning sign in my list is if the company lay off it's personnel and still the profits are not increasing and the company does not win any market share from the competitors.
So as a summary, are we leaving a bubble or not? My opinion is that we are not. If we think a about in which cycle we are, I think we are somewhere in the middle in Europe and North America is about one or two year(s) ahead of us. This is clearly seen in company valuations Europe vs. North America.
Please leave a comment what you think.
Regards,
CVM
Link to Jukka's: blog: http://www.nordnetblogi.fi/kymmenen-varoittavaa-merkkia-porssissa/20/02/2017/
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