Posts filed under “Valuation”

Stovall: Inflation/Rate Adjusted Stocks Don’t Look Expensive


“When an inflation overlay is included, P/Es don’t look as expensive”

-Sam Stovall


The U.S. equity strategist at S&P Capital IQ suggests that one must include low yields and low inflation rates when determining if stocks are expensive. The chart above shows average price-earnings ratios for the Standard & Poor’s 500 Index since 1948 at five ranges for the consumer price index. (GAAP Earnings based on quarterly data).

Year over year inflation rates of less than 1.5 percent has an S&P 500 average P/E of 22.5; its currently trading at a P/E of 21.3.

Earnings based on methods other than GAAP also make stocks look cheaper, according to the report.

Stovall also cited data showing the S&P 500 ratio was 18 percent higher than the average regardless of CPI. The S&P 500 ended last week at 17.8 times operating earnings, which exclude unusual items. The ratio is 16 percent lower than the GAAP reading.

Category: Inflation, Valuation

Cullen Roche vs Andrew Smithers on Tobin’s Q

I love this debate between the idea of Tobin’s Q-Ratio as th be all for valuation analysis. It is embodied between Smithers & Co. quoted in this scary BBRG article and Pragmatic Capitalism’s Cullen Roche. Here is PragCap: “Better yet, look at the number of times this ratio has been cited during the most recent bull market…Read More

Category: Bad Math, Data Analysis, Investing, Valuation

Bargains Reside Beyond U.S. Borders

Source: BlackRock

Category: Markets, Valuation

Vanguard CEO: “We want to drive costs even lower”

“We are not done on the cost side . . . We think we need to keep raising the bar on that.” So says Bill McNabb, CEO and Chairman of the Vanguard Group. The firm, managing over $3.1 trillion dollars in client monies, has long been known for its obsessive focus on keeping costs low….Read More

Category: Corporate Management, Investing, Podcast, Valuation

Does Record Picasso Sale Signal a Bubble?

The headlines screamed across the Web yesterday: Picasso’s Women of Algiers smashes auction record. Two Artworks Top $100 Million Each at Christie’s Sale. Picasso Painting Sells for $179.4 Million; Sets Auction Record. The record for paintings was joined by a record for a sculpture, when Alberto Giacometti’s “Pointing Man” was purchased by an anonymous bidder for $141.3 million….Read More

Category: Bubbles, Sentiment, Valuation

Stocks, Profits, GDP

Stocks, Profits, GDP David R. Kotok, Chairman and Chief Investment Officer Cumberland Advisors May 11, 2015     So here we are. The GDP of the United States is approaching $18 trillion (17.8 is the most recent estimate, and that is before many forthcoming revisions). That estimate reflects the known effects from the strengthening dollar,…Read More

Category: Think Tank, Valuation

Nasdaq Bubble Stole From Future Returns

Yesterday, we discussed why the Standard & Poor’s 500 Index has gone sideways for the past few months. The prime suspects were rich valuations, earnings crimped by falling energy prices and higher returns to be had overseas. Today, I want to look at the Nasdaq Composite Index. It closed at 5,056.06 yesterday, surpassing its March 2000 dot-com…Read More

Category: Markets, Psychology, Sentiment, Valuation, Web/Tech

Is the Nasdaq in another bubble? (An Interactive Journey)

Click for crazy cool an interactive roller coaster. Source: WSJ

Category: Cycles, Digital Media, Markets, Valuation

S&P 500′s Dubious Market-Cap Weighted Anniversary

  click for larger graphic     The Standard & Poor’s 500 Index is market-capitalization weighted, meaning that companies with higher stock-market valuations have a bigger influence on the index. There has been a cottage industry of criticism about this structure. Recently, it has led to a new world of fundamental indexing and so-called smart…Read More

Category: Analysts, Index/ETFs, Markets, Valuation

Three Commandments of Stock Valuation

Many metrics can be used to value markets. Which should you trust? Barry Ritholtz Washington Post, March 7 2015       “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.” — John Kenneth Galbraith Let’s take a look…Read More

Category: Apprenticed Investor, Investing, Valuation