10 attractive stocks at 10 times earnings
It may be old-school, but the price-to-earnings ratio remains a powerful tool for gauging stocks. A P/E ratio of about 15 is historically average. After the market drop of July 16, the stocks in the Standard & Poor's 500 Index were selling for an average multiple of a bit higher than 15. During the dotcom bubble, some tech stocks had P/E ratios in the mid-20s – meaning investors were bidding up these companies' stock prices even though the earnings for the dot-coms weren't great. That didn't work out so well.
A lower multiple means a stock is cheaper than average, usually because of some widely-known problem. But as John Dorfman, chairman of Thunderstorm Capital, points out, it's important to remember that stocks advance by exceeding expectations. Low expectations are easier to exceed than high ones, which is why unpopular stocks with low P/E ratios generally do better than popular ones.
Here, then, from Mr. Dorfman, are 10 bargains trading at 10 times earnings