No. of Recommendations: 13
What is a good source for the S&P 500 PE ratio analysis? I have not stumbled across anything particularly useful. I would like to have a succinct report that tells me the following information with sources:
The trailing 12 months P/E ratio for the S&P 500. (I have seen 25x and 27x quoted.)
The trailing 12 months for the S&P 500 segmented by things like magnificent seven, industries etc.
And the same numbers for the next 12 months, including key assumptions around profit margins and GDP growth.
I think I have read that the forward PE is as low as 18 or 20. This seems to be at odds with: the recession risks, higher taxes risks, reversion to mean profit margins and all the other problems.
Maybe the investment banks have this type of information for their clients only. I am almost completely in the dark about market valuations but suspect they are high and that fits with the individual companies I have looked at.
In the media reports and discussions about what the stock market might do, valuation discussions seem to take a back seat, which doesn’t make sense to me.
I remember 20 odd years ago paying 20 times earnings for Wrigley, when the market PE was probably around 14 or something and it seemed like a very high price. You could buy great companies at 12X and some smaller good companies at 6X.
My sense is that it’s going to be extremely difficult to make money in equities from current levels, generally. Now a days 14x is considered cheap, 20x normal and 30x okay, with some great and established companies selling for 40x and more.
I also agree that the Ben Graham central idea, was to suggest a framework for protecting your principal. That margin of safety doesn’t have to be paying working capital but can be a moat combined with an attractive valuation. We do not have attractive valuations and that means safety of principal is on shaky ground, particularly in the context of the near term headwinds.
I imagine investing used to be something only people and organisations that had excess capital had to think about. They wanted a safe place to park that money and a satisfactory return. In the last few decades, investing itself has become a way to get rich. On the one hand there is a lot of cash on the sidelines and plenty of innovation happening. But on the other hand it all looks unattractive to me with plenty of potholes ahead and some potential sinkholes!
