Bargain hunters prowl for stocks
— -- With stocks struggling this year, most investors want to cry about the money they've lost. But others are seeking bargains.
One of the most closely watched measures of stock value, the price-earnings ratio, is below levels hit at the bottom of the last bear market, and specific stocks have far lower valuations.
A P-E shows how much investors are willing to pay for each $1 a company earns, so in theory, the lower a P-E, the better a buy a stock should be. Investors need to go back a long time to "find a market, on a valuation basis, that is as compelling as it is today," says David Sowerby of Loomis Sayles.
The Standard & Poor's 500 index trades at 24.7 times earnings reported for the most recent 12 months, S&P says. That is below the 27.1 P-E when the last bear market bottomed in September 2002, which suggests to bulls that the market could be a better buy now than it was then.
When it comes to individual stocks, an extremely low P-E can also indicate Wall Street has questions. Consider these S&P 500 stocks with a P-E of 8 or less:
Dluzhevskiy thinks these issues may linger, but he says Qwest has been effective in limiting revenue loss by catering to business customers and maintaining profits with lower costs.
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