Incredibly inexpensive US stocks cheapest since 1990!

Even after the biggest rally since the 1930's, US stocks remain the cheapest in two decades as the economy improves.

Earnings estimates for Standard & Poor's 500 Index companies from Apple Inc. to intel Corp. and CSX Corp. climbed 9.1 percent on average in April, twice the gain in their prices and the largest monthly increase since at least 2006, data compiled by Bloomberg show. The benchmark gauge for American equities is trading at 14.2 times forecasts for its companies' profits, lower than any time since 1990, except for the six months after Lehman Brothers Holdings Inc. collapsed.

Income is beating analysts' estimates by 22 percent in the first quarter, making investors even more bullish that the rally will continue after the index climbed 80 percent since March 2009. While bears say the economy's recovery is too weak for earnings to keep up the momentum, Fisher Investments and BlackRock Inc. are snapping up companies whose results are most tied to economic expansion.

New-home sales surged the most since 1963, recovering from the April 16 rout when the Securities and Exchange Commission said it was suing New York-based Goldman Sachs Group Inc. for fraud. The index is up 9.2 percent for 2010, the largest gain in the world's 15 biggest equity markets, Bloomberg data show.

While analysts are raising estimates, they're not boosting investment ratings. It's easier for analysts to adjust their earnings estimates than to aggressively put forth strong 'buy' recommendations. It may be a reflection of concern about the resilience of earnings in 2011 and beyond.

Companies are losing the benefit of a weaker dollar after the currency appreciated 9.5 percent since November against a basket of six trading partners. A rising currency cuts demand for American exports and reduces overseas revenue when converted back to dollars.

David Rosenberg says US stocks are poised for losses because they've become too expensive

Economic growth will slow and stocks retreat as governments around the world reduce spending after supporting their economies through the worst recession since the 1930's.


In these times of crisis you should invest in sheep stocks such as these in America. The stock exchange always has a good evolution in the long run.

This blog was based on following article: http://www.investmentnews.com/article/20100426/FREE/100429917


Liesbeth Masschelein
2FV4