Unpacking PE ratio as crystal ball for lump-sum investing?

12tonelizzie

Unpacking PE ratio as crystal ball for lump-sum investing?

jimjames

On the other hand you could equally say that now wasn't a bad time to invest as the P/E ratio is within the average and towards the low end of what it has been. If it was 20 I'd be very wary of committing lots of money.

Thats just for the UK market, others may/will behave differently.

kidmugsy

I suggest that you google Andrew Smithers, and then read what he has to say about market valuation. He says that two distinct measures both give you a decent appraisal of whether equities (in the UK or US) are good value - CAPE (Cyclically Adjuted Price to Earnings Ratio), and Tobin's "Q". He says that they tell you little or nothing about what to do in the short term, but that they are valuable long term indicators.

Reaper

A bit off topic but yesterday's Sunday Times was going on about looking for low P/E high yield shares. I tend to agree but one of their top picks was Dutch Telecom firm KPN, offering a 7.3% yield and going on to say

"Investors in KPN could see a dividend growth of 5% this year."

Unfortunately a quick seach reveals a dramatic profit warning from KPN last Thursday, plans to lay off 25% of its workforce and even a brief suspension of its shares as they tumbled 7.8%. I realise they write these articles during the week but how hard would it have been to trim the article prior to publication? It would have saved them looking like numpties.

sabretoothtigger

The yield is even higher after the price fell

I was asked to look at Deutsch Telecom recently, maybe its a sector thing. They sold off some assets? but anyway my verdict on the price and chart was it should gain not be sold here as gains so far have been limited in the wider view.

Telecoms seems like cheap tech exposure to me quite often, not sure why as its a relatively regular income /utility isnt it
Also need to look at BT, have they stopped sucking yet