Stocks are more risky than ever before

The stock market’s average share is worth 25 times earnings; this is at the upper stratosphere of price. The historical average is around 14. In recent weeks, I have sent out example after example of stock fundamentals disconnected from the stock price. Here is the breakdown of the stocks in our semiconductor relative-strength sector. This sector gained a second to the best 4.4% in September; the Technology sector gained the highest, 5.4%.

Symbol Last 3 Qtrs Avg EPS Growth Sales % Last Qtr
SWKS 9% -7%
ASML -21% -5%
MRVL -75% -25%
TSM -15% 3%
NVDA 38% 24%
QCOM -12% 4%
AMAT 21% 13%
MU N/A -25%
INTC 6% 3%

 
In normal times, without central banks around the world making a thick fog around all financial numbers, the data above would be concidered extremely weak. Only NVDA, in the table above, has reasonable earning and sales figures.

The Dow and the S&P have moved sideways since the beginning of August. The Nasdaq Composite has continue to gain. But this gain is very suspect, as the data above shows, and as I showed last week with the Technology Hardware Sector. Imagine how horrible the financial data must be of sectors that are worse than the top two! It is very difficult to pick stocks that are likely to move higher; there are so few truly bullish stocks. But it is easy to pick weak stocks with truly terrible fundamentals.

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