An Even More Fertile Habitat

2 months ago, in the link below I wrote about equities being a fertile investing habitat.

I’d even say, there is no alternative (TINA), but that’s just a headline grab.

I mainly discussed the relative valuation and importantly the Earnings Yield of the S&P 500 versus the 10 year bond.

n.b. when P/E’s are 20, 30 and 40, absolutely cheap is difficult to find, although us stockpickers will continue to search.

https://robzdravevski.com/2020/07/15/equities-the-fertile-habitat/

Next year’s consensus P/E for the S&P 500 is 23 but on this occasion I wanted to extract the EPS estimates of the “inflated” FANNGM stocks.

These 6 stocks now make up 49% of the Nasdaq 100’s market cap and 26% of the S&P 500.

I found this work below which puts the S&P 500 P/E ex-FAANGM on 19.4.

This means the S&P 500’s Earnings Yield is 5.15% or 7.3 times more than the 10 year bond yield.

Re-iterating & re-phrasing comments from the linked story above…this multiple has NOT been seen since World War 2.

So, what’s the trade?

Perhaps…..Long selected portfolio stock ideas (or Russell 600 Small Cap) and Short Nasdaq 100 to hedge out the “overvalued” market risk?

I’ll get back to you.

source: https://www.yardeni.com/pub/faangms.pdfhttps://www.yardeni.com/pub/faangms.pdf

September 8, 2020
by Rob Zdravevski
rob@karriasset.com.au

Overbought S&P 500

The S&P 500 Index (at 3,478) and the Nasdaq 100 Index (at 11,972) are the most overbought since the Feb 18, 2020 highs….

it’s time to hedge out some market (index) risk.

August 27, 2020
by Rob Zdravevski
rob@karriasset.com.au

Bitcoin & SPX correlation

Doesn’t Bitcoin (the blue line) seem to have a leading correlation to the S&P 500 ?

?? see my earlier post mentioning a peak in Australia’s ASX 200 ??

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