WWII 056: Arbitrage in the Stock of Trina Solar Limited for a 118% Weighted Average Annualized Return, What is the PEG Ratio and How to Use It, Leon Cooperman on Bull Market Age

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Main Topic: 118% Weighted Average Annual Return from the Arbitrage in Trina Solar Limited

This episode is about a merger arbitrage that closed in March, 2017 and provided a really phenomenal return considering that it was one of the merger arbitrages I have done with the least hurdles to closing. I wrote an extensive case study of the arbitrage in the stock of Trina Solar limited which has all the details and links to all the documents I reviewed.

Ask JB: What is the PEG ratio and how do I use it?

Ask JB: Finding the PEG Ratio (self.investing_discussion)

submitted 15 days ago by WellTemperedClavier

Hello! I'm a newcomer to investing. I recently learned about PEG ratios, and wanted to try a few exercises. Specifically, I thought I'd compare different computer manufacturers to see which ones might be under- or overvalued.

I've been using Yahoo!Finance. Is this considered a good place to gather data? One thing I've noticed is that when I search for a company (say, Hewlett-Packard) I'll actually get a number of different options—HPQFF8, HPQFG8, etc. Which one of these would I use?

Also, how do I calculate the growth? The price, EPS, and P/EPS are already listed. I do see "Quarterly Revenue Growth" under the Statistics tab, but I'm not sure if this is what I'm looking for.

Thank you!

JB Says: The PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share (EPS), and the company's expected growth. In general, the P/E ratio is higher for a company with a higher growth rate.

PEG Ratio = (Price/Earnings) / Annual EPS Growth

The PEG ratio of 1 is sometimes said to represent a fair trade-off between the values of cost and the values of growth, indicating that a stock is reasonably valued given the expected growth. A crude analysis suggests that companies with PEG values between 0 and 1 may provide higher returns.

A PEG Ratio can also be a negative number if a stock's present income figure is negative, (negative earnings) or if future earnings are expected to drop (negative growth). PEG ratios calculated from negative present earnings are viewed with skepticism as almost meaningless, other than as an indication of high investment risk

The PEG ratio's validity is particularly questionable when used to compare companies expecting high growth with those expecting low-growth, or to compare companies with high P/E with those with a low P/E. It is more apt to be considered when comparing so-called growth companies (those growing earnings significantly faster than the market).

News: What Leon Cooperman of Omega Advisors has to say about the Bull Market


Leon Cooperman quoted Sir John Templeton in this video clip from CNBC. Sir John said, "Bull markets are born in pessimism, grow on skepticism, mature on optimism, and die on euphoria. Leon estimates that were are in the optimism stage and it won't take much from here to reach euphoria.

About the Author

Jeremy Scott Bailey is an investor, author, entrepreneur and host of the "What Works In Investing?" podcast now available on iTunes. He is founder and Chief Investment Officer of Burgeón Group, Inc. an investment advisory firm that provides portfolio management services to families and individuals.

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