There seems to be certain stocks that are "liked" and other stocks that are "disliked" and this trumps any fundmental, financial analysis of the company's business prospects.
Over the past 6 months, I've made a point of buying a number of stocks with very good business prospects (earnings, growth and low debt) and a low P/E ratio. Not only did these have low P/E ratios compared to the other firms in their field, but they were also lower than the average P/E in the market.
None of these stocks have gone anywhere, while stocks of competitors doing similarly in terms of earnings, etc. have gone up steadily.
CNBC has a guy who pops up every month or so, and runs a screener for these sorts of things, looking for the handful of stocks in the market that are underpriced (relatively low P/E), but have great fundamentals. He always has a long list of requirements in terms of earnings, growth, debt, high analyst recommendations, etc.
All the stocks he has recommended over the past 6 months have done nothing, especially compared to their higher P/E competitors.
The point of mentioning these screens is that the stocks are NOT lower in P/E because the companies are worse. It is simply that human beings will not buy the stocks, clearly for no rational reason.
Today the screener guy popped up again on CNBC, and this time his screens required an unprecedented number of high criteria to be met, plus low P/E. Two stocks came through, and I pulled up a chart of the first one. It has gone down steadlly all day today.
And, for the first time ever on CNBC, a stock mentioned did not go up in the 5 minutes after the mention !
CONCLUSION: Some stocks of good companies have lower P/E ratios, because people irrationally do not want to buy them.
In fact, this may apply to most lower P/E ratios...
Over the past 6 months, I've made a point of buying a number of stocks with very good business prospects (earnings, growth and low debt) and a low P/E ratio. Not only did these have low P/E ratios compared to the other firms in their field, but they were also lower than the average P/E in the market.
None of these stocks have gone anywhere, while stocks of competitors doing similarly in terms of earnings, etc. have gone up steadily.
CNBC has a guy who pops up every month or so, and runs a screener for these sorts of things, looking for the handful of stocks in the market that are underpriced (relatively low P/E), but have great fundamentals. He always has a long list of requirements in terms of earnings, growth, debt, high analyst recommendations, etc.
All the stocks he has recommended over the past 6 months have done nothing, especially compared to their higher P/E competitors.
The point of mentioning these screens is that the stocks are NOT lower in P/E because the companies are worse. It is simply that human beings will not buy the stocks, clearly for no rational reason.
Today the screener guy popped up again on CNBC, and this time his screens required an unprecedented number of high criteria to be met, plus low P/E. Two stocks came through, and I pulled up a chart of the first one. It has gone down steadlly all day today.
And, for the first time ever on CNBC, a stock mentioned did not go up in the 5 minutes after the mention !
CONCLUSION: Some stocks of good companies have lower P/E ratios, because people irrationally do not want to buy them.
In fact, this may apply to most lower P/E ratios...
