Mr. Market’s Mental State

Legendary value investor Benjamin Graham is probably most famous for his Mr. Market parable. In the story, an investor is greeted each day by Mr. Market, who offers to purchase the investor’s stocks. Every offer is different, and sometimes the price is insanely high, sometimes it seems fair, and other times it is clearly too low. But one thing remains the same – the intrinsic value of the investments does not change.  As a result, the investor is left to decide when to buy and sell based on the relationship between the intrinsic value and the price Mr. Market is offering.

All value investors today should keep the analogy in mind, and implement the overall concept. To assist in that goal, ModernGraham has various tools available, and the infographic shown above is one of them, displaying a summary of the valuations of 878 companies reviewed by ModernGraham.

This month, out of the 878 companies reviewed by ModernGraham, the average PEmg ratio (price over normalized earnings) is 26.72 and the average company is trading at 121.83% of its intrinsic value. Last month, the average PEmg ratio was 26.78 and the average company was trading at 122.1% of its intrinsic value.

The highest PEmg average we have seen while tracking this information was 26.78 in July 2017 while the lowest PEmg average was 22.25 in February 2016. The highest average intrinsic value was 122.1% in July 2017 and the lowest average intrinsic value was 103.19% in February 2016.