Feature Infographics Mr. Market Mental State

The Mental State of Mr. Market – May 2015

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 505 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 504 companies reviewed by ModernGraham, the average PEmg ratio (price over normalized earnings) is 25.17 and the average company is trading at 86.64% of its intrinsic value.  Last month, the average PEmg ratio was 25.64 and the average company was trading at 86.18% of its intrinsic value.

The highest PEmg average we have seen while tracking this information was 26.17 in December 2014 while the lowest PEmg average was 24.29 in October 2014.  The highest average intrinsic value was 93.48% in January 2015 and the lowest average intrinsic value was 86.18% in April 2015.

Month Average PEmg Average % of value Defensive % Enterprising % Speculative % Undervalued % Fairly Valued % Overvalued %
August 2014 24.36 90.57% n/a n/a n/a n/a n/a n/a
September 2014 25.37 93.37% n/a n/a n/a n/a n/a n/a
October 2014 24.29 90.24% 12% 35% 53% 31% 21% 48%
November 2014 25.32 90.61% 12% 35% 53% 29% 21% 50%
December 2014 26.17 92.28% 11% 34% 55% 28% 23% 49%
January 2015 25.63 93.48% 10% 34% 55% 30% 20% 50%
February 2015 25.79 92.72% 10% 35% 55% 33% 19% 49%
March 2015 25.79 88.03% 10% 35% 55% 31% 19% 49%
April 2015 25.64 86.18% 9.9% 35.2% 54.9% 32.1% 19.4% 48.5%
May 2015 25.17 86.64% 9.1% 36.1% 54.8% 32.1% 20.4% 47.4%

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2 thoughts on “The Mental State of Mr. Market – May 2015

  1. Nice, Ben,
    You present an unvarnished and neutral view of the companies you review. While at times I say to myself, ” Well, he’s not looking at…,” and then I remind myself that you are presenting solely on the numbers, which is where the value in your reports lie, and it’s up to me to look at the why’s.

    I have a question on this report. The companies you review indicate a higher % of undervalued companiesand a lower % of intrinsic value than a year ago. As you add companies, are you seeking out those which you think maybe undervalued or do you select the companies at random?

    1. CJ, the companies selected so far have been part of the S&P 500, with a few additional selections a while back. I simply worked my way through the list of component companies until I got to the current point.

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