TOP 25 vs. Other Purple Chips

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PURPLE CHIPS - TUTORIAL - TOP 25 VS OTHER PURPLE CHIPS TRANSCRIPTION. Welcome to a Purple Chips Tutorial; I am John Schwinghamer, the author of Purple Chips published by John Wiley & Sons and available everywhere. Please pause your video to read our disclaimer. Today we are going to talk about the difference between the top 25 Purple Chips and all the other Purple Chips. The main thing to observe is that the Top 25 Purple Chips have the smoothest earnings per share (EPS) curves and the least number of negative quarters so in other words no surprises. Because they have a history of only a few negative quarters they are the most predictable in terms of valuation. We are going to compare Oracle (ORCL) versus Microsoft (MSFT) and Johnsons and Johnson (JNJ) versus Novartis (NVS). Let’s move on to those stocks and we are going to look at the charts here; We are looking at the long term chart of Oracle Corporation (ORCL) and you can actually see that the earnings progression has been very, very smooth over the years and there have not been too many negative quarters in the earnings chart here. You can see a bit of a flattening in the earnings back in 2000 period; that was just after the tech moved on but essentially the earnings progression has been very steady for the last 7 years or more and this is certainly very reliable and an indication of the quality of this stock. Now let’s compare that to the Microsoft (MSFT); you can see that we have a little bit bumpier progression in earnings with Microsoft. This is the key and this is what makes the difference between the top 25 and all other Purple Chips. So you had flat period in earnings here and you had a flat period in earnings here and of course you had a bit of downward period here and very recently another downward period. So this is an indication. Microsoft is a good stock; it has got a beautiful earnings progression but certainly not the same quality as Oracle. So that puts Oracle over Microsoft in my books and certainly Oracle is a top 25 Purple Chip. Let’s talk about another comparison; we are going to talk about Johnsons & Johnson (JNJ) versus Novartis (NVS). This one would become very clear in a second. Let’s start with Johnsons & Johnson $JNJ. You can see that this had an outstanding earnings progression. So if you look at this one; the white line shows the earnings over the years. There is another something that I would like to point out here is that the progression in dividends over the years. You can see that the dividend have been consistently rising over the years and along with the earnings progression. When you put these two things together this makes for a very powerful stock. Johnsons & Johnson have very few negative quarters; just a small little dip here otherwise we are going back twenty years and we have consistent growth in earnings so this is a very, very high quality stock. Now let’s compare that to Novartis (NVS) and you will see in a second that we are talking about two very different animals and hence the distinction in quality. Novartis has had fairly bumpy earnings. They are definitely in a right trend so it qualifies as Purple Chips. Also there dividends have been rising over the years which is good. Novartis has got the earnings going up overall but you had these bumpy periods so you had periods where the earnings have come off and that increase the surprise factor and this is what can lead to the corrections in the stock. We want to avoid those things because the top 25 Purple Chips have the best earnings curves and therefore the least amount of surprises. So that’s what you look for and that’s how we distinguish between the Top 25 and all other Purple Chips. The Purple Chips stocks are the great stocks but the top 25 are absolutely the best out of all the stock universe. That concludes today’s tutorial on the difference between the top 25 and the others. I am John Schwinghamer the author of Purple Chips. Thank you for watching.

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