6/17/2024
By Charles Payne CEO & Principal Analyst

The market finished higher on the week, but it didn’t feel that way. Moreover, I felt less confident about the rally when Goldman Sachs (GS) hiked its year-end target to 5,600.

Technology (XLK) gained 5.45% for the week, proving that, like space, the higher the move is, the less gravitational pull it has until there is none.

Upset But Not Afraid

It's one thing to see a handful of stocks defy all the laws of stock market gravity, but that shouldn’t mean everything else gets hammered.

I was very frustrated on Friday watching the share prices of great and undervalued companies—especially those you own—get walloped.

We have several methods of evaluating stocks beyond traditional valuation metrics, but it's worth considering how undervalued the market is outside of Technology.

According to FactSet, the Institutional Brokers’ Estimate System (IBES), First Call, and Goldman Sachs data, the S&P 500 is overvalued based on enterprise value to sales, enterprise value to Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) (cash flow), price to book, free cash flow, and earnings.

It's only below the historical valuation on the Price/Earnings-to-Growth (PEG) ratio.

But it’s the sector valuations that are eye-popping.

Every sector, save Information Technology, is trading well below its historical averages:

• Enterprise Value (EV)/Sales
• Enterprise Value (EV)/EBITDA
• Price-to-Book

This week's most puzzling action was in Industrials (XLI), which finished the week higher but stumbled into the weekend like a punch-drunk pugilist.

Price-to-Earnings

The most popular valuation metric suggests Real Estate (XLRE), Financials (XLF), and Communication Services (XLC) are incredibly undervalued.

To read the full report, contact your account representative or email Info@wstreet.com.

Charles Payne
Wall Street Strategies

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