Think the Market is Cheap? Think Again…

Everyone is talking about how cheap Apple’s earnings multiple is. So I wanted to compare that hard-to-believe number to some of the cheapest valued companies based on their simple P/E ratio.

I started by looking at the DOW stocks. I will eliminate JPM with the cheapest multiple of 8.5 because I don’t believe any bank earnings as they are all made up.

Then I looked at every other stock and guess what I found? Only two stocks have single digit P/E ratios. That’s right, the DOW, filled with “industrial” stocks, has only 2 “cheap” stocks based on their P/E multiple.

The first is Hewlett Packard (HPQ) with an 8x multiple. This is the stock that has done everything wrong in the past year and lost half its market value. It is truly hated and rightfully so. The second is Chevron (CVX), also with an 8x multiple. But CVX has a $210B market value and a 3% yield.

Every other stock in the DOW trades at a double digit multiple of earnings. Is that “cheap”? Historically, nope…

BTW–Apple’s market value of nearly $500 billion is equal to roughly 17% of the value of the 30 Dow stocks combined of roughly $3 trillion.