Formerly About Applied Materials Message Board

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Politics : Formerly About Applied Materials

AMAT 260.77

+0.2%

Dec 24 12:59 PM EST

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To: StanX Long who wrote (52882)	9/22/2001 6:22:44 PM
From: Gottfried	Read Replies (1) of 70976

Stan, Market undervalued 17% >One reliable method for gauging the fair value of stocks shows the market to be undervalued by more than 17% right now. The last time the discount from fair value approached such a magnitude was October 1998, when the market looked 16% undervalued, thanks in large part to rampant selling fanned by fears of a global financial crisis. The crisis was averted, and it proved an excellent buying opportunity for intrepid investors. We may be facing a similar situation now, according to the so-called Fed Model for valuing stocks. At its core, this model compares the interest rate being paid on 10-year Treasury notes to the "earnings yield" of stocks in the Standard & Poor's 500 Index. This earnings yield is simply the expected earnings of companies in the S&P 500 Index divided by the index's current level. For the next 12 months, the collective earnings of the S&P 500 are expected to be $55 a share. Divide that by the index's current level of 965.8, and you get an earnings yield of 5.69%. That's well above the 4.69% rate being paid on 10-year Treasury bonds.[snip] subscribers interactive.wsj.com G. e-mail me for whole story

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