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Stocks Still Offer Solid Value (2003 Report)
Summary: It is easy to find valuation metrics that support the claim that stock prices are overvalued, as bearish strategists or portfolio managers (who missed the rally since March) have done. It is also still easy to find stocks that are cheap. On average, stocks now seem roughly fairly valued, so there are as many undervalued as overpriced.
It is easy to find valuation metrics that support the claim that stock prices are overvalued, as bearish strategists or portfolio managers (who missed the rally since March) have done. It is also still easy to find stocks that are cheap. On average, stocks now seem roughly fairly valued, so there are as many undervalued as overpriced.
I'd ballpark S&P500 2003 operating profits in the $53 dollar per share range, which implies a multiple of 18.7 times earnings. That seems reasonable, given that interest rates remain at exceptionally low levels. Still, there are plenty of expensive stocks trading at high multiples without the growth rate to justify premium pricing, including Microsoft, Gillette, Coca Cola, Cisco and Intel. When large cap stocks trade at high multiples, since they carry a large weight in the S&P 500 index, they skew every valuation measure and imply that the entire market is overpriced. Why...
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This section contains 436 words (approx. 2 pages at 300 words per page) |
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