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Strategies & Market Trends : Zeev's Turnips - No Politics
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To: TREND1 who wrote (63330)5/7/2002 7:40:59 PM
From: Steve Lee  Read Replies (1) of 99280
 
Larry, I have been tracking PE values for >85% of the NDX 100 weighting for some time. There has been much talk about the meaninglessness of PE ratios during periods of low earnings and there is good logic behind such thoughts.

So I embarked on a project to track the forward sales estimates of >85% of the NDX 100 by weighting. Today I finally gathered enough data to work out the PE and PS values for the top 60 NDX stocks and the weighted average PS is only 3.89

I had expected it to be higher and am thus tempering my valuation-based bearish stance on the NDX 100 (although I am still moderately bearish for other reasons). You mentioned that you might want to concoct some kind of "Nasdaq Fed Model". If you still want to do that then I probably have the data to do it with.

One interesting observation is that the stocks that account for the highest weightings have valuation ratios well above the weighted average. If some of the smaller stocks were to be rewarded with MSFT-like multiples, then the resulting NDX launch would make today's AH action seem like a fly taking off from an aircraft carrier.

EG, if tomorrow just one stock, NXTL were to get MSFT's PS of 8.7, and all other stocks stayed level with today's close, then the NDX would go up over 10%
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