As an investor, you no doubt hear a lot of opinions about the
relative health of the market. Pundits throw the term
"valuations" around a lot, almost always using it to mean P/E
Ratio, the most widely used measurement of theoretical value.
Here are a few facts which may surprise you. The average P/E
Ratio of stocks in June 2014 is 18.3. That is slightly higher
than average, but as this chart shows very clearly, it is still
low compared to any of the market's previous "top-out" points. As
for the excessively high valuations hit at various times in the
last fifteen years, we are, as you can see,
nowhere near them.
So what is this about a correction? Well, the market always
moves jaggedly, as investors often respond to each other's moves
emotionally. This creates periods of unsustainable growth,
punctuated by brief temper tantrums in which the market tests our
nerve. These bull market corrections have been coming every two
to four months for the last two year. It has been about three and
a half months since we last did this dance, and while I have no
crystal ball, I believe beyond the shadow of any doubt that the
market is going to give traders at least one big scare before the
summer is out.
The problem is that not all stocks bounce back after
corrections, and sometimes companies that look very conservative
get beaten up as badly or worse than the rest of the market. I've
been burned by that one often myself, and that is one reason my
"safe" stocks are going to look different than most. I'm talking
about solid growth or growth and income stocks with rising
revenue and rising earnings in industries that continue to do
well even when everything else looks rough.
Here then, are my favorite stocks for the coming bull-market
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