Totally missed it...
So I decided to look into the housing stocks, figuring they've gotten beat up pretty good, only to find a nice rebound. Did I miss the bottom? You bet I did.
Housing stocks w/ low PE are a great sector to use the Historical Low PE metric. These guys got hammered (and for good reason) over the past year. But where's the bottom? This is where the historical PE ratio can really help you.
Take TOL - The lowest PE it has seen in the past 10 years is PE = 5.5 just aftet Sept 11th, 2001 and PE = 5.7 in February 2000. It reached a PE = 4.4 in July 2006. What a perfect time to buy. The market over-reacts and this is one way (not the only way or the only metric) to see if its time to buy. Other homebuilders show the same results and I missed it. Trading at $25 in July, now at $32 it seems like a big miss - I don't think it'll ever be that low again. I'm not a big buying fan right now as I don't believe the growth prospects (something you need to believe if you buy a stock with a relatively higher historical PE).
You can't win them all. I picked up MLM in a similar situation this summer and its been great since. The market learns its mistakes - looking at the historical PE is a nice metric to determine how cheap it really is. Price is irrelevant. The sector is irrelevant - only how they perform relative to their history. I must repeat it isn't the only metric and Enron was probablly at its lowest PE right before bankrupcy - that doesn't mean buy - it means do your homework to determine if its oversold.
I'd love to find a way to be alerted when stocks find their historically low PE, but Bigcharts.com is the only way I know how to check it. If anyone has a less manual way to check this statistic please blog back.