Graham and Doddsville -- Value Investing In The New Era Message Board

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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era

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To: porcupine --''''> who wrote ()	4/12/1998 10:14:00 AM
From: Freedom Fighter	Read Replies (1) of 1722

>Much discussion occurs as to whether the Market is overvalued. >Yes, by my count (at 3/31) 17 DJIA stocks were selling at a 5- >year high PE ratio. Guess what, 13 of them are not! Berney, Could you examine the 13 that are not more closely. How many are not selling at their highest PE ratio because at some point in the last 5 years they an awful year (depressed earnings) and the market recognized it as a temporary situation and did not fully punish the stock price. This would result in a high PE but not necessarily a high price. Similarly, there could be a couple that 4-5 years ago were clearly in the early stages of their cycle and investors were paying up for the expected cyclical earnings recovery. 5 years ago we were just beginning to gain steam coming out of the recession. Now as we have progressed through the cycle the PE's SHOULD tend to shrink all else being equal. THis similarly does not necessarily indicate a low price. WC

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