ASX Shares What's looking cheap on the ASX?

A lot of doomsday scenarios being spouted around the internet.

I'm a very simplistic person, and all I really look at in terms of whether market is overbought or oversold is the major indices average PE and how that compares historically.

IMO based on this, the US market (running at around 19 average PE currently) is a little overstretched. Maybe could drop back a two to three points. The historical mean is around 15.5.

Historical S&P 500 PE chart with current PE as well:

S&P 500 PE Ratio

From Australia perspective, All Ords PE as at 8 Jan was around 16. Probably closer to 15 now which is roughly where the historical mean is, so not overstretched assuming profits maintained. However given resource profits are likely to take a major hit, ie the REAL PE on actual current profits is probably higher than current PE, perhaps a little downside is warranted.

 

Alexium is looking oversold.

AJX:ASX

 

From your same reference, the Shiller PE10 @ 23.82 is still sitting 49% higher than its historical mean of 16.04, indicating there is still a fair way to go down before getting into value territory. And as healthy as the Australian PE may currently be, if the US market did go down another 30%, you can bet the Aussie market would unwillingly follow.

 

Hopefully my order for $9.98 gets filled soon but $12+ looks like the next target.

 

Why would I use the Shiller PE, which uses 10 years inflation adjusted figures, rather than just the usual PE? I find it pointless...as I said I'm a simplistic person. I cannot see the point of using inflation adjusted when the PE at every given point in time is based on prices at that time anyway...inflation is irrelvant for this.

If I was going to use something different, I would use the PEG ratio which uses 12 month forecasted earnings but I think that is more relevant for individual company research. I use it quite a bit...for example, right now the resource companies have pretty average PEs, but their PEGs on forecast earnings (you need to use your own forecast not those of the company) would be quite overvalued because their profits are going to drop. Not sure there is a chart for the index average PEG either, though have never looked.

 

Agreed.

Been topping up!

 

Because whenever it has been this high before, the next decade has been shown to produce very poor returns and the two times it has been higher (1929 and 2000) there has been a major market correction within a few years.


As with other indicators, it is not perfect, but it is useful to consider given this particular track record.

 

Well I did say in my initial post that could drop 2-3 points...that would be considered poor returns since that's a overall market pullback of 10-15% or higher.

True but normal PE average ratio would have shown the 2K market to be overvalued as well. Admittedly it didn't pick the Depression correction but that was so quickly recouped, that imo the market really wasn't overvalued, so it was just an aberration, similarly to the GFC.

Bascially whenever SP500 PE gets to around 20 as it is now, , it is time to start exercising caution. If I was to use the Shiller PE instead I would say that mark is around 25 again roughly where we are now. No real point using both imo, so I choose to use the 'simpler' one.

 

They are both simple to use as someone else does the calculations for us, so I don't see why you wouldn't look at both. The Shiller PE cuts out a lot of volatility noise and has been pretty useful in predicting long term downturns, so I look at it and others here may want to as well.

 

Today's news

Shares tipped to lose $28bn as another market slump looms

Tomorrow's may differ

Last six months is down around 13.5 %for ASX200

 

By simpler I mean in its calculation. I do not understand the point of using historical inflation adjusted earnings (especially with an index with ever changing constituents) therefore am not prepared to use something I don't understand much like i won't invest in a company i don't understand.

 

So far I was right (insert #humblebrag here), plenty of overselling in the first 10min of trade this morning - now easing its way to more equilibrium in the first hour.

Just wish I had some cash to play......


pinkboy

 

I was tipping a pretty flat end to the market after initial panic sell. Still long way to go though so waiting to see how it pans out.

 

i've jumped back into healthcare at 3:55 today - ramsay.

 

ANZ @ $24 is almost 11% gross yield. Solid.

pinkboy

 

Very close to adding RHC and CCL to industrials portfolio

 

CCL getting down toward GFC lows but has some longer term support around $8 so anything just above there would appear to be excellent buying. Certainly a great longer term addition for the Industrial dividend focused investor.

 

sold out of ramsay this morning around 1030. luckily i sold ;p

 

Dangerous to buy a stock purely for the yield.

Chances are the dividend will get cut resulting in a greater capital loss

 

Fully understand the dangers of chasing yield, but for the accumulator, ANZ is not the worst of stocks to top up on.

pinkboy