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James Li
James Li
Articles (757)  | Author's Website |

Buffett’s Market Indicator Reaches 144.4% Ahead of Berkshire Shareholder Meeting

Markets fall from intraday highs following Fed’s comments on rate cuts

May 01, 2019 | About:

On May 1, the Wednesday before the 2019 GuruFocus Value Conference and Berkshire Hathaway Inc.’s (NYSE:BRK.A)(NYSE:BRK.B) annual shareholder meeting, Warren Buffett (Trades, Portfolio)’s favorite market indicator reached 144.4%, approximately 5% higher than its April 1 reading of 139.2% and 4% lower than its all-time high of 148.5% set in March 2000.

1556735719927.png

Broad market indexes fall from intraday highs

Although the Dow Jones Industrial Average and Standard & Poor’s 500 index traded at intraday highs close to their all-time highs, the Dow tumbled 162.77 points from Tuesday’s close of 26,592.91 while the S&P 500 closed 19.84 points lower than the previous close of 2,945.83.

According to CNBC columnist Fred Imbert, Federal Reserve Chairman Jerome Powell said in a news conference on Wednesday that the recently low inflationary pressures might just be “transitory” and that a rate cut is not necessary at this time. The two-year Treasury rate increased from 2.20% to 2.27% on the heels of Powell’s comments.

Despite the broad market selloff, top Berkshire holding Apple Inc. (NASDAQ:AAPL) increased 4.91% to $210.52 on strong June-quarter earnings guidance, sending the Cupertino, California-based tech giant’s market cap close to $1 trillion.

1902293942.png

Stock market remains overvalued

As of Wednesday, the Wilshire 5000 full-cap index stands at $30.415.6 trillion, approximately 1.44 times greater than the recently reported gross domestic product. Based on the current market level, the U.S. market is expected to return -2.2% per year over the next eight years.

1556737156515.png

According to the predicted and actual returns chart, the expected market return ranges between -9.9% and 2.10%.

Even though the market remains significantly overvalued, several GuruFocus model portfolios have outperformed the benchmark in at least eight of the past 10 years. Such portfolios include the most broadly held portfolio, the Buffett-Munger portfolio and the undervalued predictable portfolio.

Premium members have access to a wide range of value screens, including the Ben Graham Net-Net screen and the All-in-One Screener, which allows users to create their own value screens. Table 1 lists the value screener record as of May 1.

Screener

USA

Canada

UK

Europe

Asia

Oceania

Latin America

Africa

India

Graham Net-Net

227

56

53

278

634

10

9

13

47

Undervalued Predictable

50

6

56

135

68

8

46

6

12

Buffett-Munger

36

4

32

89

91

2

26

3

48

Peter Lynch PE

30

0

16

45

56

0

6

2

10

Peter Lynch PS

93

8

33

116

60

6

28

23

38

Peter Lynch PB

127

24

53

167

86

6

29

23

60

Lynch p2ebitda

188

7

48

230

91

7

17

18

51

Hist Low PS

26

2

14

47

81

0

17

5

25

Hist Low PB

46

3

23

65

84

2

28

9

21

Magic Formula

4528

549

2292

7888

13308

575

1100

385

3464

52-week Low

873

104

351

1186

2318

84

367

137

1127

52-week High

1956

252

1229

3154

1855

197

536

106

477

3-year Low

407

61

163

534

1183

34

146

57

660

3-year High

1484

157

941

2197

906

140

440

66

270

5-year Low

285

36

119

347

792

21

86

47

416

5-year High

1321

146

907

2018

709

131

412

53

250

High Div Yield

56

5

9

116

39

14

22

8

6

Table 1

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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