Distribution of Stocks by PE

Apr.21, 2014 in Financial News 1 Comment

There is a lot of talk recently that stocks might be getting expensive. Stock prices have climbed since 2009, so it is definitely reasonable to start questioning stock valuations. I’m starting to have some trouble finding obviously undervalued stocks.

I thought a quick way to check on the scarcity of value opportunities would be to look at the distribution of stocks by the price to earnings ratio. Below I have included a histogram of the number of stocks in each of ten equal buckets of trailing twelve-month PE excluding extraordinary items between 3 and 99.

Distribution of Stocks by PE – April 16, 2014

Distribution of Stocks by PE - April 16, 2014

As you can see above, most stocks are now trading above a PE of 12.5.  We can compare this to the PE distribution a year earlier in the chart below.

Distribution of Stocks by PE – April 16, 2013

Distribution of Stocks by PE - April 16, 2013

There were significantly more stocks trading below a PE of 12.5 last year.  For a really stark contrast, we can compare both of these distributions to the price earnings ratios of stocks after the market crash in 2009.

Distribution of Stocks by PE – April 16, 2009

Distribution of Stocks by PE - April 16, 2009

Back in 2009, the lowest decile had the most number of stocks, all trading for a PE of below 12.5.  Finding value opportunities in the market then was like shooting fish in a barrel. If you are interested in looking at other distributions, check out the Factor Tool at Portfolio123.com.


I got a request to look at 2008 and 2007 distributions for comparison to today’s PE distribution.  Here they are:

Distribution of Stocks by PE – April 16, 2008

PE Distribution 2008


Distribution of Stocks by PE – April 16, 2007

Distribution of Stocks by PE - April 16, 2007

It is amazing how similar the 2008 distribution is to the current PE distribution of stocks in the market.  Might this be a warning to investors worth noting?  It sure seems so to me.

What are your thoughts on current stock prices?  Please share your thoughts in the comments section below.


Quantitative Value

Feb.28, 2013 in Book Reviews 1 Comment

Quantitative Value book coverI recently started reading Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors ($) by Wesley R. Gray and Tobias E. Carlisle.  Both of the authors are fellow value investors who blog. Tobias Carlisle runs Greenbackd and Wesley Gray writes the Turnkey Analyst blog.  I’ve followed both of their blogs for several years. I’m very excited to share this book with you.

I first met Wes Gray when he became one of the early members of Fat Pitch Financials Contributors Corner years ago. While he was a member he caught my attention when he mentioned he was deploying to Iraq. We exchanged emails a few times in the past and I started reading his blog soon after it first started. When I learned of his book, I knew it would definitely be worth reading and I had to get it. Read the rest of this entry »

Special Situations Real Money Portfolio 2012 Performance

Jan.16, 2013 in Special Situations Real Money Portfolio Leave a Comment

Sorry I’ve been so quiet here on Fat Pitch Financials. I found 2012 to be an extremely challenging year for me both financially and professionally.  Thankfully, I came through it all pretty well. The Special Situations Real Money Port had another successful year.

The Special Situations Real Money Portfolio started 2012 with a balance of $46,029.93. I deposited another $2,000 at the end of the year and the portfolio closed out the year with an ending balance of $53,497.88.  Adjusting for that deposit, the Special Situations Portfolio returned 11.4% in 2012. That’s a bit better than the Special Situations Real Money Portfolio performance for 2011, but not ideal. I did not find too many great workouts in 2012, so I didn’t end up beating the 16% total return for the S&P 500 in 2012.

While I under performed in 2012, I’ve still been able to achieve a 23.13% annualized rate of return since inception.  The portfolio’s total return from inception back on October 19, 2004 until the end of December 2012 is 234.36%.

My hope for 2013 is that going private transactions and tender offers start happening a bit more often.  If not, I’m going to have to start looking for new types of workout opportunities.

Portfolio123 and StockScreen123 Switching Fundamental Data to Compustat

Jul.12, 2012 in Research Tools Leave a Comment

At the end of the day today, Portfolio123 and StockScreen123 will be switching data providers. The company is making the bold move of switch from Thomson Reuters to Compustat for its fundamental data.  This will change the underlying data used to power these stock screening and backtesting tools.

Read the rest of this entry »

Markets closing early today for 4th of July

Jul.03, 2012 in Financial News Leave a Comment

In observance of Independence Day here in the United States, the securities exchanges will close early today. The markets will close at 1:00pm ET on Tuesday, July 3rd, 2012. Exchanges will also be closed on Wednesday, July 4th, 2012.

Enjoy your 4th of July!

What’s Hot at Value Investing News This Week

Jun.21, 2012 in Financial News 1 Comment

Here’s a list of the top stories this week at Value Investing News based on the number of times the story was shared on top social media sites:

  1. Buy and Hold Has Failed: So What is the Best Investment Strategy?
  2. Top Finance People to Follow on Twitter: Market Folly’s Alpha List
  3. Should the Price I Paid Affect My Decision to Sell a Stock?
  4. Eric Sprott on the Recent Volatility in Gold
  5. Is Nokia Becoming Too Cheap
  6. Value Investing: Hidden Stock Price = Deliberate Practice
  7. Why Lone Pine’s Steve Mandel Likes Kohl’s (KSS)
  8. Neev Capital’s Rahul Sharma on H&M, Inditex & Emerging Market Retail
  9. Trian Fund’s Presentation on Lazard
  10. Julian Robertson on the Hedge Fund Industry Past & Present

Most Shared Value Investing News Stories of the Week

Jun.06, 2012 in Financial News Leave a Comment

Here’s a list of the top stories this week at Value Investing News based on the number of times the story was shared on top social media sites:

  1. Aim for the Middle
  2. Works if Small, Fails if Large
  3. What We’re Reading ~ 5/31/2012
  4. Warren Buffett’s Stock Buying Secret Revealed
  5. What We’re Reading ~ 6/6/12
  6. Presence of Hedge Funds in Chapter 11 Process & Effects on Bankruptcy Outcomes
  7. Lone Pine Capital Discloses Kinder Morgan Stake Via El Paso Deal
  8. Book Review: The Kelly Capital Growth Investment Criterion
  9. Pennies from Hell
  10. Sorted Weekly Tweets

Price To Tangible Book Value Backtest

Mar.23, 2012 in Stock Fundamentals 1 Comment

I recently reported on the results of my price-to-book ratio backtest. Shortly after running that backtest, I realized that many value investors probably actually prefer using price to tangible book value. The price to tangible book value ratio is simply the current price of the stock divided by the latest quarterly tangible book value per share. Tangible book value  is defined as book value minus goodwill and intangible assets.

Often goodwill and intangible assets end up on a balance sheet as a result of an acquisition, and unfortunately the more a company overpays for an acquisition, the higher those assets (goodwill and intangibles) end up being reported on the balance sheet. The price to tangible book value ratio to some degree overcomes this issue and more closely represents what common shareholders can expect to receive if the firm goes bankrupt and all of its assets are liquidated at their book values. Read the rest of this entry »

Most Shared Value Investing News – St. Patrick’s Week 2012

Mar.17, 2012 in Financial News Leave a Comment

Here’s a list of the most shared articles posted on Value Investing News this past week:

  1. Great Warren Buffett / Berkshire Hathaway Resources
  2. Why George Soros Owns Comverse Technology (CMVT): Stock of the Week
  3. Third Point’s 2011 Letter: Rationale for Owning UniCredit, Skyworks, Abercrombie & More
  4. Ratios for evaluating turnarounds
  5. A Value Investor’s Take on Shorting
  6. Join Market Folly’s Third Annual FREE March Madness Bracket Contest
  7. 11.0010010000111111011010101000100010000101101000110000100011010011
  8. Redacted Version of the March 2012 FOMC Statement
  9. What We’re Reading ~ 3/14/2012

Were there any other great value investing articles that were published this past week but are missing from this list? If so, please share them in the comments section below.

Return on Invested Capital Variation Backtest

Mar.05, 2012 in Stock Fundamentals 2 Comments

Last Friday I asked my Twitter followers, “Which fundamental should I backtest next?” Andrew Martin replied. Here’s a copy of our conversation:


@FatPitch: @ACJMARTIN What’s your definition of ROC?

@ACJMARTIN: @FatPitch it’s more like ROIC. Op profit + deprec + goodwill amort – tax – capex divide by total assets – cash.

I used the data and backtesting tool provided by Portfolio123. This backtest uses the same filtered universe of stocks as my recent P/B backtest. I’ve designed the filtering criteria for this backtest specifically for individual investors and with a focus on enhancing data quality. The filters include the following criteria: Read the rest of this entry »