The Wall Street Waltz: 90 Visual Perspectives, Illustrated Lessons From Financial Cycles and Trends, Revised and Updated Edition

Chart 11

Value Line Industrial Composite: All the Stats That Are Fit to Print

If I could include only 10 charts in this book, instead of 90, this one would be right at the head of the pack. It lets you discern more about the market and its valuation characteristics than any other chart I've seen. You can compare a single stock or group of stocks to the broad market's characteristics. In essence it gives you a complete 15-year statistical snapshot of the market as if it were agglomerated into one big stock of a single big company, plus a projection for next year—all of which you can use either to help determine whether the market is too high or low or to compare individual stocks with the overall market.

You get a price history of the Value Line Industrial Composite (VIC), which both in the timing of its movements and their approximate magnitude closely mirrors other broad market indexes such as the S&P 500 or the Dow Jones Industrials. On the right-hand side of the chart are added row numbers from 1 through 24. Consider row 9. It shows you VIC's average annual P/E, which was 19 in 1972 before the market bust. But you can also see that anyone who bought VIC at a P/E less than 10 and held for a few years did fine.

Then you can go on from there to be a real student of the market. For example, at the top of the page, right under the title, “Industrial Composite,” are the annual high and low prices for VIC. It shows you that in 1978 VIC ranged from $14½ to $19½. You can compare that ...