Friday, May 7, 2010

Amazing Valuations?

After a record decline in the in the DOW industrials of nearly 1,000 points, its amazing the level of valuation in the markets. Maybe its a big valuation trap. Earnings could fall apart like they did in 2008, but for the most part they all rebounded by the end of 2009.

Numerous stocks that we own including AerCap Holdings (AER), Atwood Oceanics (ATW), Hartford Financial (HIG), and Teradyne (TER) now trade in the in the 6-7 PE level. Numerous other stocks trade below the 10 forward PE levels. Apple (AAPL) only trades at roughly 15x the actual 2011 estimate though they are growing at multiples beyond that.

Will 2008 repeat itself just 2 years later? That just seems very unlikely with everybody stressing on the European debt issue for months now. Everybody on CNBC continues the panic mode. Why didn't anybody pound the table to buy this market? Its cheap on historic terms. This is the opposite of 2000 and 2008 is way to fresh in peoples minds for another continued panic. Is anybody still long the market? We shall see tomorrow, but do we have to see 5 PEs before buying?

Tomorrow should be wild. I'd buy on any further dips assuming we get any. A positive vote from Germany on the bailout will likely lead to a very positive open. The Fed will remain at near zero rates for a lot longer if the market remains weak. That is very bullish and the market is missing this.

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