My biggest concern is, while I agree with you that S&P 2023 EPS TTM could end up being $200, because we have not yet seen this reflected in estimates (Yardeni earnings forecasts shows $235 as an estimate), we have more room to fall before the expectation (let alone the reality) of that is priced in.
$235 Yarendi expectation -> $200 your expectation is a 15% difference. That means analysts (and consequentially the market pricing in those analysts expectations) are "incorrectly" estimating earnings 15% higher than they might be in your opinion.
Analysts predicted ~10% earnings growth in 2008 and it turned out to be -70%
Analysts by and large just extrapolate the trend. If there’s a severe recession, actual earnings could be 190 or even less.
That being said, buying around 3500 or below seems a decent value long term. But I don’t think this is a market where you should wait, instead pick individual companies that are already too cheap and hold them.
I bought a bunch of REITs with 6-8x ffo multiples, low debt, and double digit growth rates. Why bother with the 20x+ PE companies?
There are also many small cap growth companies at 1-2x sales and 30%+ growth rates. Why buy one at 10x sales?
IG bonds yielding 8% close to risk free?
You’d think this would all be obvious, yet major imbalances in valuations exist and is there for the taking.
Comments
My biggest concern is, while I agree with you that S&P 2023 EPS TTM could end up being $200, because we have not yet seen this reflected in estimates (Yardeni earnings forecasts shows $235 as an estimate), we have more room to fall before the expectation (let alone the reality) of that is priced in.
$235 Yarendi expectation -> $200 your expectation is a 15% difference. That means analysts (and consequentially the market pricing in those analysts expectations) are "incorrectly" estimating earnings 15% higher than they might be in your opinion.
Scary times.
Analysts predicted ~10% earnings growth in 2008 and it turned out to be -70%
Analysts by and large just extrapolate the trend. If there’s a severe recession, actual earnings could be 190 or even less.
That being said, buying around 3500 or below seems a decent value long term. But I don’t think this is a market where you should wait, instead pick individual companies that are already too cheap and hold them.
I bought a bunch of REITs with 6-8x ffo multiples, low debt, and double digit growth rates. Why bother with the 20x+ PE companies?
There are also many small cap growth companies at 1-2x sales and 30%+ growth rates. Why buy one at 10x sales?
IG bonds yielding 8% close to risk free?
You’d think this would all be obvious, yet major imbalances in valuations exist and is there for the taking.