Where the Values Are

By on May 27, 2010

Abnormal Returns looks at various interpretations of value from the perspective of different quoted sources.

Jeff Miller (Dash of Insight):

The current yield on forward earnings is 7.85%, a rate close to that offered at the market lows of February to March of 2009…By this measure, the market is just as cheap as it was at the time of the 2009 lows.

Mark Hulbert at Marketwatch comments on two supposedly accurate models:

Interestingly, both are quite bullish. Eisenstadt tells me that his model is currently forecasting a 20% return for the S&P 500 index [..] over the next six months. Fosback reports in the latest issue of his newsletter that his model is forecasting a 26% total return for the stock market over the next year and a 75% five-year return (equivalent to around 12% annualized).

Vincent Fernando (The Money Game) feels the same way as Jeremy Grantham:

In the end, you have to park your money somewhere, and given the concerns regarding currency weakness and inflation, plus worryingly-hyped commodities, perhaps defensive non-financial non-cyclical entrenched companies at historically cheap valuations are the real safe-havens right now.

And then there is Bill Hester of the Hussman Funds:

The graphs show that relative to the US, most international markets are as favorably valued as they have been in the last 40 years (alternatively, the U.S. is about as overvalued relative to international markets as it has ever been).

Abnormal Returns concludes:

In the end the market valuation backdrop only sets the tone for trading activity. The past decade has done nothing but show us that markets can become unhinged from reality both on the upside and downside. The stock market has not done much the past eight months. However investors who have honed their stockpicking skills can use this market downturn as an opportunity to start researching ideas with a clear margin of safety.

Source: Abnormal Returns
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