kaur raagParticipantMarch 20, 2020 at 7:24 AMPost count: 5
At what price are apple and google fairly valued or even undervalued?Sean HymanKeymasterMarch 20, 2020 at 8:53 AMPost count: 806
Apple’s forward P/E is 22. I’ve easily seen it at P/E’s of 10 or so before it’s cheap. But stocks like AAPL/GOOGL’s turnarounds will be seen more on long-term technical charts than just fundamentals alone. They were overly-loved and therefore overly-owned and overvalued. That all has to unwind and will be easier to track that in real-time on those long-term charts.
It’s likely that, until we’re nearer to the end of wave C in the broader stock market, most stocks (including these) may not prosper. Keep in mind, we’re likely at the bottoming period for wave A, getting ready to go into the bear market bounce of wave B (which can temporarily benefit many stocks including these) but them not find “true bottoms” until that bear market rally fades and retests the old lows and very likely goes much lower.
Right now, the average person is still looking for a bottom. When they give up all hope that one will come…you’re getting nearer to a bottom. We’re not there yet. Also, the average P/E on the S&P 500 has only come down to an average P/E of 18-19. For more on all of that, see this week’s video in the Members Area.
There will be a day to be in these stocks, because they’re cash-rich companies and with good growth rates, etc. But that day is not today. Sure there are “tradable moments” in the bear market bounce as it unfolds. But not true investable moments yet.Philip EcclesParticipantMarch 20, 2020 at 9:02 AMPost count: 4
Different industries have different P/E where they are comfortable. Macrotrends.net was my research source for this question. Looking at 12/31/06 forward, GOOG had its lowest PE on 9/30/11 at 16.74. It is currently moving from its peak of 58.65 on 12/31/27 to the current 22.60 level.
AAPL peaked 12/31/07 @ 31.38.62 and has been in a long sideways saucer shape with the low of 8.90 on 06/30/13, and has now gone slightly over the saucer lip to a current PE of 19.33.
Because Sean talks about the indices having PE where it is comfortable, I looked the values up for the stocks to see if they also had a comfortable spot. After seeing this I am very uncertain that Sean would agree with my hypothesis of the indices and the individual stocks having a comfortable spot.Sean HymanKeymasterMarch 20, 2020 at 9:13 AMPost count: 806
When there’s historic, broad-based overvaluation that all has to be unwound…these stocks can get slammed more P/E wise than they typically do. We’ll see it unfold faster in real-time on the long-term charts, even than we may see in updated P/E adjustments.
No doubt they’re good companies. But it’s not enough to buy a good company. It has to be a good company at a good price. Houses were good houses in 2007. Yet they fell big-time because they were at unfavorable prices. Same with stocks.Fred LundinParticipantMarch 20, 2020 at 9:53 AMPost count: 1
Sean, just wondering…are we considering any banks? GS or C?Sean HymanKeymasterMarch 20, 2020 at 9:59 AMPost count: 806
No. My thoughts are: Why invest in a bank when their profit margins just got squeezed through emergency interest rate drops. And why buy a bank stock when we’re at the start of an economic contractions when they’re about to have non-performing loans/foreclosures, etc. in their future.
The time to buy banks, in my opinion, is just a little before the next upturn in the economy. Even then, it would likely be wisest to go with either the strongest banks or possibly even a bank ETF then. But we’re FAR from that time right now.Thomas RhodesParticipantMarch 20, 2020 at 12:52 PMPost count: 16
This is all really interesting. We are in the troughs of a historical event. This is not just a market dip.
Some of my coworkers are going all in on AAPL. They do not want to hear, “too soon”. 2000 and 2008 took 36 months and 18 months ish to bottom.
It will be interesting seeing the A B C on the way to the bottom.
Sean thank you for your teaching.Sean HymanKeymasterMarch 20, 2020 at 1:03 PMPost count: 806
You’re welcome. Yeah, the only main quicker one I can find is the crash of 1987, which we’re almost at those levels/speed now. But typically, with the S&P 500 still at a P/E of 18-19 and with people still itching to get back in…that’s usually not indicative of true bottoms, but only a bear market bounce at best.
Here are the last two Apple declines in the last two market crashes (first chart) compared to the decline we’ve seen thus far in this one (2nd chart). As you can see, not even Apple is immune to the market decline…of course, neither is Warren Buffett’s Berkshire Hathaway either.
Attachments:You must be logged in to view attached files.
- You must be logged in to reply to this topic.