The opportunities have been few and far between, Wrote Mason Hawkins in his letter to shareholders. We and our shareholders must maintain the same patience we have exercised for two years. Very little appears underpriced today. The U.S. market is most challenging. The S&P 500 sells at 18X the next year's expected earnings. This P/E ratio is meaningfully above the long-term historic average, although extremely low bond yields justify a somewhat higher P/E. The 18X seems more ominous given that it incorporates historically high profit margins, low interest rates, and this business cycle's peak earnings. Such market pricing does not yield many companies selling for half of corporate worth and leaves little room for improvement in optimistic market assumptions. While foreign markets appear a bit more discounted than the U.S., in the second quarter many major international markets appreciated, moving stock prices further away from our required discount. Record low volatility worldwide has made finding new investments difficult across the globe. These observations do not imply that we anticipate dramatic market corrections here or abroad. However, if a correction does occur, we are prepared to take advantage of the investment opportunities.
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