One of the main discussion points of the meeting on Friday of BetterInvesting Magazine’s Editorial Advisory and Securities Review Committee is the recent difficulty in finding bargains in the market. If you’ve been completing stock studies, you might have come to the same conclusion.
It seems as though a rising tide has lifted many, many boats recently. For the Standard & Poor’s 500 index, the price-earnings ratio (based on the most recent 12 months) was 18.4 as of April 5. That’s up compared with 16.3 a year ago. The P/E for the Dow Jones industrial average also increased to 15.9 from 14.6. And the Nasdaq 100 stocks’ average P/E grew to 17.1 from 12.3.
After a few years of gains, don’t be surprised (or dismayed) to see a market contraction. There are always reasonably priced stocks to study, but the committee members caution that investors should be homing in on valuation. In other words, pay particular attention to potential investments’ P/Es, committee members say.