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How Cheap Are Those Stocks by P/E?



April 24, 2008 – Comments (6)

Bespoke has a great post that truly shows the rising P/E of stocks.  It looks like the trend is very clearly up.  They also put a red dot on graphs to show when the market topped in the fall.  The fact that P/E's are rising when the market has declined means that these graphs truly don't show the degree to which earnings have declined.

Additionally, they didn't post consumer staples, in the 100s, or telecom because it is negative.

Bespoken had another single graph about six weeks ago on P/E as well.  I'd love to see another on the market as a whole.

I keep talking margin squeeze and that rising P/E is the squeeze in action. 


6 Comments – Post Your Own

#1) On April 24, 2008 at 12:42 AM, dwot (29.11) wrote:

Wow, I just did my post this morning about health and how more people would be chosing to do without health care.  My timing is incredible.  This story, Insurer says economy has dented its prospects, says the market is shrinking.

I was not sure if I wanted to underperform some of these or not.  I am sure the price will be going down, but I am not sure if it will be more than what the S&P will go down.  Seeing how it is a shrinking market, and likely to be an easier one for people to decide to stop paying I am going to under perform the sector.

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#2) On April 24, 2008 at 4:17 AM, DemonDoug (30.94) wrote:

That's a real gutsy move dwot.  even though i hate the homebuilders, i still go on a case by case basis.  it's real hard to bet against insurers that have enormous lobbying moneys out there.

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#3) On April 24, 2008 at 8:29 AM, dwot (29.11) wrote:

Yeah Doug, it is gutsy.  I added a few.  I am sure the industry will be less profitable.  I am sure the industry has been getting by and appearing more profitable then they are by not putting aside enough reserves for those they insure.  I am probably early in my assessment.  I've had several picks that have gone and doubled on me before tanking.

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#4) On April 24, 2008 at 8:55 AM, mandrake66 (69.06) wrote:

My only worry is that the haircut they've already taken, which has left them nearly bald, has already taken much of the downside action out of them. I think they're stuck in a trading range until substantive new bad news appears, and they could even rally.

If you are going to downgrade, however, right now might be the time to do it, since several more companies will report in the immeidate future (I think Wellpoint, Cigna, and Aeitna are all coming up shortly). A confirmed downtrend for the sector will probably knock them all down a bit more. 

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#5) On April 24, 2008 at 9:32 AM, dwot (29.11) wrote:

mandrake, I noticed they've taken a haircut.  Right now the P/E is quite low on quite a few of them.  Your comment is as back and forth as I am on them.  I think the industry is going to prove to be a bad place to be, but I get in early on my analysis so often on CAPS I end up with these negative performers before they turn around. I been up to 200 points down on picks that I've closed out with gain, eventually...

I might wait here and have a closer look.  I just underperformed Seirra beause it has the highest P/E of the ones I looked at.

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#6) On April 24, 2008 at 11:22 AM, Imperial1964 (94.18) wrote:

I've already lost 30% on UNH and I bought after they had already gone down significantly.  I'm not sure there's much downside left for them.

I've been too busy to follow their competitors like I should.

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