The Mental State of Mr. Market – October 2014

Market State (1)

Legendary value investor Benjamin Graham is probably most famous for his Mr. Market parable.  In the story, an investor is greeted each day by Mr. Market, who offers to purchase the investor’s stocks.  Every offer is different, and sometimes the price is insanely high, sometimes it seems fair, and other times it is clearly too low.  But one thing remains the same – the intrinsic value of the investments does not change.  As a result, the investor is left to decide when to buy and sell based on the relationship between the intrinsic value and the price Mr. Market is offering.

All value investors today should keep the analogy in mind, and implement the overall concept.  To assist in that goal, ModernGraham has various tools available, and the infographic shown above is one of them, displaying a summary of the valuations of 421 companies reviewed by ModernGraham.  Each valuation can be found in the Valuation Index, available for free, or premium members can access more detailed information including screens and tables of the valuations.

This month, out of the 421 companies reviewed by ModernGraham, the average PEmg ratio (price over normalized earnings) is 24.29 and the average company is trading at 90.24% of its intrinsic value.  Last month, the average PEmg ratio was 24.36 and the average company was trading at 90.57% of its intrinsic value.

The highest PEmg average we have seen while tracking this information was 25.37 in September 2014 while the lowest PEmg average was 24.29 in October 2014.  The highest average intrinsic value was 93.37% in September 2014 and the lowest average intrinsic value was 90.24% in October 2014.

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One thought on “The Mental State of Mr. Market – October 2014

  1. Vinny LaBash says:

    The personality of Mr. Market has changed over the decades. Today he can more accurately be described as a delusional, bi-polar paranoid schizophrenic who consistently forgets to take his meds. He will drive you crazy if you let him.

    The best way to overcome his madness and the ones who let themselves be infected by him is to ignore the media and invest according to the fundamentals. The reason this is so difficult to do for many investors is that the media is constantly telling you to do something else. Ignore the noise and pay attention to this website, an island of reason in a sea of insanity.

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