equity quiz

which stock has most variable earning ? A value B growth C momentum



A - CFA rationale is that they are tied to economic cycles vs growth which will/should grow no matter the stage of the cycle


A - got burned on this on a test

Let’s play the devil’s advocate: Could it be B because growth stocks show high positive variation in earnings? Value stocks such as utilities tend to have steady earnings…

answer is A contrarian like to buy cyclical stock and hope reverting to mean,such stocks include GM, ford, chresler


“Earnings variability. A value-oriented portfolio will hold companies with greater earnings variability because of the willingness to hold companies with cyclical earnings.”(p235). P/E is is low ==> E/P is high. The EPS growth rate is lower than that of growth companies, but its % changes could be larger.