BEHIND THE MONEY: Take Away Those 12-Year-Low Blues With a Look on the Bright Side
With the market at a 12-year low, it's a healthy exercise to try and find some good things in this world. I'll highlight a few that I hope will keep you from totally abandoning your positive viewpoint of any free enterprise today and holing yourself up in your basement.
#1: VALUATIONS. FM trader Karen Finerman highlighted on Squawk Box this morning the growing ranks of stocks with single-digit multiples. Microsoft was one that she highlighted favorably, sporting a P/E ratio of 9.1. Fooling around with the stock screener tool on CNBC.com, I found that more than half of the S&P 500 trades at a trailing multiple below 10. Other noteworthy companies on that list include Exxon Mobil , Hewlett-Packard and Walt Disney . Bloomberg News notes this morning that the S&P 500's overall P/E is the lowest since 1986. Now some companies are cheap for a reason and will stay that way, but many of these could be great long-term buying opportunities.
#2: HOUSEHOLD BALANCE SHEET (FOR SOME). Those folks who did not take on more than they could handle during the housing binge are using this time to repair their balance sheet. FM trader Guy Adami points out that the savings rate is near the highest in eight years. Guy bets that unlike in Japan, Americans will eventually spend this money again, showering an even bigger "stimulus" down on the economy. But this may take some time. The last high in the savings rate was in 2001 and it would be another year before the stock market would bottom back then.
#3: TAKEOVERS. There are still some sectors where the assets justify a premium. Pete Najarian highlights the health care sector, where Roche is expected to raise its bid for the part of Genentech it doesn't already own. In technology, see the Microsoft-Yahoo saga and Ballmer's comments today. After a 58 percent drop in the last 12 months, Yahoo shares may have gotten cheap enough where a premium for its search assets is justifiable.
#4. NO KETCHUP-PACKET HOARDING. Consumers are still buying ketchup. HJ Heinz shares jumping today as profits leap 11 percent.
#5. IRON MAN. A good movie, food or product will still 'make it', even during what some (like Nouriel Roubini) say is a "near depression". Marvel Entertainment's fourth-quarter profit doubled, benefiting from the DVD release of "Iron Man", a surprise blockbuster hit that reinvigorated the super hero genre. Also see Amazon.com's Kindle for an example of a product so innovative that it is above the fray.
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