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HistoricalPEGuy (63.47)

The DJIA is Cheap



March 14, 2007 – Comments (3)

The recent market corrections have left me thinking, are there really bargains out there?  Also, I can't help but hear Greenspan's voice in the back of my head '40% chance of recession in the fall of this year'.  I'm not quite at the point of putting all my money in gold, but I am looking at the blue chips to see what's cheap.  Lo and behold, one after another, the historical P/Es of many of the DJIA components are rock bottom.  Also, there are just some great companies in there.  Here's a quick tour of some of the cheap ones based on the last 10 years (I didn't have the patience to write down all 30).

MMM:  Prior to 2007 year low = 16, Today = 14.7

JNJ: Prior to 2007 year low = 20, Today = 16.5

C: Prior to 2007 year low = 10, Today = 11.8

AIG: Prior to 2007 year low = 12.8, Today = 12.9

HD: Prior to 2007 year low = 11.4, Today = 13.7

MSFT: Prior to 2007 year low = 17, Today = 23

CAT: Prior to 2007 year low = 10, Today = 12.4

WMT: Prior to 2007 year low = 17, Today = 16.4

KO: Prior to 2007 year low = 19, Today = 21

PG: Prior to 2007 year low = 20, Today = 22.3

GE: Prior to 2007 year low = 15, Today = 17.3

Of course, this is just a simple metric.  Some of these companies probably deserve to have historically low P/Es due to stagnant future prospects.  There is a simple way to spread your risk and not buy a single one of them.  When the entire Average starts to look cheap, buy the ETF - DIA.  If you are like me and don't want to bail out of equities in the face of impending doom (damn you, Greenspan), the DJIA isn't a bad place to be, especially when its on the cheap and paying dividends while you wait for the market to recover.  Speculative stocks will get trampled while blue chips will get a more minor correction, presenting itself with yet another great buying opportunity in a large handful of great companies.


3 Comments – Post Your Own

#1) On March 15, 2007 at 7:50 PM, Greshm (97.30) wrote:

Hi H-PEguy,

I should know this but don't:  How far back are you going to find the historically low PE for each?

Intriguing analysis...



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#2) On March 16, 2007 at 12:01 AM, HistoricalPEGuy (63.47) wrote:

10 years - Read carefully!

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#3) On March 16, 2007 at 2:22 AM, Greshm (97.30) wrote:

Duh, sorry I missed that! 


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