Bill Nygren, manager of the Oakmark fund, said investors are focusing on the wrong measure when they grow concerned about how far stock prices have risen since March. Then, he said, stocks crashed to "irrationally" low prices amid fear, so the recent climb is based on rational expectations for an eventual recovery. He is focused on earnings.
In 2006, he said, annual operating earnings for the S&P 500 companies were $88 a share.
If, as expected, they reach the mid- to upper $60s next year, "then earnings levels are down by a quarter from three years ago," he said. "Not to think there will be a rebound from that level is silly."
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In 2006, he said, annual operating earnings for the S&P 500 companies were $88 a share.
If, as expected, they reach the mid- to upper $60s next year, "then earnings levels are down by a quarter from three years ago," he said. "Not to think there will be a rebound from that level is silly."
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