By
Borsgade
Bill Nygren of Oakmark writes in his market commentary for Q3 2023 that the most interesting hunting grounds this year are among companies with low P/E ratios.
He sees no real decline in the quality of companies that have the lowest P/E levels on the S&P500.
Among other things, he writes:
Currently, the 50th lowest P/E stock sells just over 8 times earnings, and the 50th highest sells at 60.
So, the highest priced stocks are about 7 times more expensive than the lowest priced. Over the 30-plus years we have data, the P/E ratio averages about 4, bouncing between 3 and 5. (So, if there are 50 stocks below 10 times earnings, there are 50 over 40.) It was meaningfully higher only one time—when it hit 9 times at the end of the internet and tech bubble in 2000.
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