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James Li
James Li
Articles (727)  | Author's Website |

Warren Buffett’s Market Indicator Rises Near 135%

Dow exceeds 25,000 for the first time since fourth-quarter 2018 meltdown

On Friday, Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) CEO Warren Buffett (Trades, Portfolio)’s favorite market indicator reached 134.3%, approximately 10.7% higher than its two-year low of 123.6% set on Jan. 2. Based on the current market valuation, the expected return of the stock market in the next eight years is -1.2% per year.

1549049400358.png

Dow breaks 25,000 on strong jobs report and earnings from key companies

The Dow Jones industrial average closed at 25,063.89, up 64.22 points from Thursday’s close of 24,999.67 despite reaching an intraday high of 25,186.44 in morning trading. Strong jobs growth data contributed to the early gains: according to Bureau of Labor Statistics data, the U.S. economy added 304,000 jobs in January, close to double the consensus estimate of 170,000. Additionally, strong earnings from Dow components Boeing Inc. (NYSE:BA) and Buffett’s top holding Apple Inc. (NASDAQ:AAPL) fueled the index's growth for the week. Other companies like Chevron Corp. (NYSE:CVX), Exxon Mobil Corp. (NYSE:XOM) and Merck & Co. Inc. (NYSE:MRK) led gains on Friday.

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Stock market remains significantly overvalued

The U.S. stock market remains significantly overvalued ahead of the Super Bowl and Chinese New Year: the Wilshire 5000 full-cap index is approximately 1.34 times greater than the last-reported gross domestic product. A total market cap to gross domestic product ratio of at least 1.15 indicates “significant overvaluation.”

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According to the “predefined and actual returns” chart, the expected market return ranges from -9% in the most pessimistic case to 3.70% in the most optimistic case.

See also

Table 1 reports the value screener records as of Feb. 1.

Screener

USA

Canada

UK

Europe

Asia

Oceania

Latin America

Africa

India

Graham Net-Net

281

66

54

283

625

11

7

12

161

Undervalued Predictable

65

3

34

78

66

5

33

7

7

Buffett-Munger

28

3

15

48

77

0

17

4

31

Peter Lynch PE

42

2

15

43

70

0

5

2

3

Peter Lynch PS

143

8

59

124

117

11

38

19

21

Peter Lynch PB

191

23

77

151

129

10

36

17

36

Lynch p2ebitda

203

9

57

188

143

10

11

15

23

Hist Low PS

46

3

17

38

135

2

13

4

15

Hist Low PB

60

2

20

47

138

2

24

8

14

High Div Yield

67

4

12

94

25

11

13

10

4

Magic Formula

4257

549

1818

5364

12633

549

794

330

2470

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Disclosure: No positions.

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About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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