You have to be. The quick run up from the March lows may have been too much, too fast, and maybe too soon.
Is the stock market undervalued?
Prior to the crash, I didn’t pay much attention to broad market valuations. I put more emphasis on individual holdings and try to get a range of the company’s intrinsic value and if it’s a bargain, buy. I still hold that belief, but I will admit, I take a sneak peak at market valuation every once in a while. I use two tools 1) Morningstar’s Market Valuation Graph 2) Gurufocus Total Market Cap/ GDP. I won’t go much into how these graphs are derived as their sites do that, but just simply looking at the two graphs we can see the market how quick the market became fairly valued.
Morningstar Market Valuation
Gurufocus Total Market Cap/ GDP
Where to find value stocks?
Bargains still exist, you just have to look a bit harder and be a bit of a contrarian. I recently wrote about 7 Magic Formula Health-care Stocks. I am also looking at non-magic formula stocks in that arena. Finally, a couple of Warren Buffett stocks might be undervalued if you examine his portfolio carefully. Johnson & Johnson comes to mind and I know Burlington-Northern was purchased in the $80′s and averaged down to the mid to low $60′s. And of course, there’s the ol “fish where no one is fishing” small cap arena. These puppies might be a bit more tougher to research, but bargains still exist.
Below are some great videos I have found and uploaded to the Value Investing Pro Youtube Channel. I only upload quality stuff and try keep track of the better known fund manager/economist that have a great track record.
Warren Buffett On Ben Graham