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Hussman Strategic Growth Message Board

  • sean_erickson2000 sean_erickson2000 May 25, 2013 6:58 PM Flag

    A look at the p/b ratio and ROE

    Hussman wrote in his 2/1/10 comment and accompanying chart that normalized earnings should be 13.6% of book value. Year end book value is 667 per share which would put normalized earnings at 90.71, implying a current normalized P/E of 18.18 less than 20% above historical norms. The current p/b ratio of sp500 is 2.47, a ratio of 2.0 would be in line with history.

    Whats most surprising to me is that hussman hasnt taken a meaningful position in his international funds, as the historical ROEs are similar (12-13%) to the united states as hussman has mentioned a couple of times. With emerging markets around 1.5 x book and developed europe around 1.7 x book indicating below average valuations

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