We are not suggesting that there is no value in stocks, more that there are no "value stocks." The chart below highlights the performance of several style indices provided by S&P and Birinyi Associates. The "Birinyi Dividend Index" is constructed of S&P 500 stocks that yielded between 4% and 10% on 12/31/08 (112 issues and not all financial). As shown, these dividend stocks and the S&P 500 Pure Value index have performed worst of the seven styles shown (-62.7% and -67.5% respectively; the S&P 500 Financial Sector is down 78.4% by comparison).
In short, the values have gotten better, the yields have gotten higher and the market does not care. P/E ratios, price to book, and other valuations do not matter in this market. At the end of the day any valuation based on trailing earnings has no bearing going forward, and estimates for these supposed "value" companies are so uncertain that they have become useless. Google with a P/E of 20 is up 34% on the year, and GE with a P/E of 4.7 is down 44%.
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