30/09/18

Fasanara Capital: "Nobody Cares About Market Valuations These Days"



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Fasanara Capital: "Nobody Cares About Market Valuations These Days"
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Submitted by Francesco Filia of Fasanara Capital

How Expensive Is The Equity Market In The US

The biggest equity bubble out there is in the US: the Nasdaq and the S&P. This is no news, few disagree in market chatters. Nobody is positioned for it, though. Looking at valuation metrics, there is not the shadow of a doubt: Shiller P/E, Hussman P/E, P/Sales, P/Book, EV/EBITDA, Cash Flow Yield, Forward P/E.

At Fasanara, we add to the list the 'Peak PEG Ratio' (read here a full working definition), a measure of how expensive a stock is relative to its ability to generate earnings. In single stocks, the PEG ratio is commonly used, as is rationale for investors to have the will to pay higher multiples for stocks capable of generating high growth. Yet, for indexes, this is rarely done. If and when you do, this is the incontrovertible result:

We consider cyclically-adjusted earnings, like Prof Shiller institutionalized (and won a ...

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