Sunday, July 08, 2007

Stock Market Valuations Round Trip / Bespoke

Time for a p/e round trip about the globe. Bespoke has some excellent insights. Here is another country that is "beating" even China and the Nasdaq. I also recommend the latest piece from Hussman about the "Fed Model". Here is the data for the Russel 2000. No bargain.....Especially when financials are the largest sector.......

Es kann nicht schaden sich mal wieder einen Überblick in Sachen Bewertungen zu verschaffen. Unter den o.g. Links sind noch Informationen zu anderen Märkten sowie eine Einschätzung von Hussman zum sog. "Fed Model".

There seemed to be quite a bit of interest in our post yesterday about China's Shanghai Composite now having a lower valuation than the Nasdaq. Below we have updated our chart of current P/E ratios for the major indices of selected countries. As shown, the Nasdaq currently has the highest trailing 12-month P/E of the countries we analyzed. The Netherlands, Germany and the Euro Stoxx Index have the lowest valuations


Looking at estimated P/E ratios for the current year, we see that Japan's Nikkei-225 Index is the highest, while the UK's FTSE 100 is the lowest.
Photo

We continue to get a large number of requests for current financial ratios of sectors and indices. For your convenience, we have updated them for the ten major US sectors below. Numbers highlighted in green are better than the S&P 500 and numbers highlighted in red are worse. Currently, the Consumer Discretionary sector has the highest 12-month trailing price to earnings ratio, while Energy has the lowest. Not surprisingly, the Utilities sector offers the highest yield at 3.00%, while Technology offers the lowest at 0.58%. Photo

>Here is a different view that is not based on pe´s. When you look at the cash flow multiple for the "cheap" european stocks you will be suprised to see that they are reaching new highs. But when at the same time buyouts ( Hilton at 10 times, Hilton 14,5 times) are topping even this lofty multiple the bulls will argue that there is still more upside. Good luck......

>Hier ein etwas andere Blickwinkel der mal nicht das KGV als Grundlage nimmt. Nimmt man den Cash-Flow als Maßstab sind selbst die angeblich so "billigen" europäischen Aktien nicht mehr ganz so günstig wie evtl. das nackte KGV suggeriert. Au der anderen Seite kann man als bullishes Argument sicher anführen das die letzten großen Übernahmen alle ein 10 faches ( Huntsman, Hilton ) des Cash-Flows gezahlt haben. Viel Glück......


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4 Comments:

Anonymous Anonymous said...

I try not to pay too much attention to P/E anymore -- was eigentlich schwierig sein kann. Because you hear so much about it. But I have been burned by it in the past -- when I was, perhaps, as an 'investor' (I'm more of a trader these days) a bit naive. Be long companies with a low P/E who seem to be growing earnings, be short companies with a high P/E if they don't seem to be growing earnings very quickly. There are times when this can work. Also times when it doesn't. The markets can really screw you in this way. It is hard to find the right combination of trends, sentiment, analysis, intuition, etc etc in order to make a consistent profit. While P/E is a part of that, right now for me it's only a small part.

eh

1:05 AM  
Blogger jmf said...

Hi Anon,

i agree 100%!

But it is funny how the media and Wall Street is so focused on this single "valuation" point and they spin this to death on almost every release/media appearance.

In reality it´s all about liquidity.

One excellent example that shows pe´s are not a good indicator is the homebuilding sector.

in 2005-2206 they had single digit pe´s and stocks tanked. today almost no earnings left to calculate a pe...

The same could and i think will happen to financials.

1:18 AM  
Anonymous Anonymous said...

In reality it´s all about liquidity.

Stimmt. I've also learned a few hard lessons trading some low volume stocks -- you really need, again on average, volume (liquidity) to get price moves.

The same could and i think will happen to financials.

I left a comment over on the Bespoke site.

eh

1:30 AM  
Blogger jmf said...

Hi Eh,

the liquidity argument is one of the main reasons i won´t short China.

I´m waiting for a good entry point to short the Russel 2000

Some of the "smart" cdo investors just learn the "liquidity" lesson the hard way :-)

2:13 AM  

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