Comments on: A Review of John Bogle’s “Common Sense on Mutual Funds” – Chapter 2 http://allfinancialmatters.com/2009/12/08/a-review-of-john-bogles-common-sense-on-mutual-funds-chapter-2/ A personal finance blog dedicated to discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance. Sat, 11 Feb 2012 20:32:19 +0000 hourly 1 http://wordpress.org/?v= By: KC http://allfinancialmatters.com/2009/12/08/a-review-of-john-bogles-common-sense-on-mutual-funds-chapter-2/comment-page-1/#comment-441123 KC Sun, 13 Dec 2009 23:45:30 +0000 http://allfinancialmatters.com/?p=4283#comment-441123 I've been using forward P/E a lot lately. It uses expected earnings for the coming 12 months to calculate P/E for the company. I know its not a factual number and anything can happen in the future, but I don't believe current P/E tells the entire story either since earnings have been really beat down in the past 12 months. Between the two numbers you should get a good idea of where earnings are headed. I’ve been using forward P/E a lot lately. It uses expected earnings for the coming 12 months to calculate P/E for the company. I know its not a factual number and anything can happen in the future, but I don’t believe current P/E tells the entire story either since earnings have been really beat down in the past 12 months. Between the two numbers you should get a good idea of where earnings are headed.

]]> By: finsovet http://allfinancialmatters.com/2009/12/08/a-review-of-john-bogles-common-sense-on-mutual-funds-chapter-2/comment-page-1/#comment-441083 finsovet Fri, 11 Dec 2009 06:48:17 +0000 http://allfinancialmatters.com/?p=4283#comment-441083 S&P's chief investment strategist Sam Stovall: The reason we're trading at such an elevated P/E — currently 86 for the S&P 500, compared with the historical average of 16 — is that the most commonly used P/E ratio is based on earnings from the trailing 12 months. And in the fourth quarter of 2008 the S&P recorded its first loss ever in earnings. We don't expect that to repeat itself. Using estimates for 2010 earnings instead of the trailing 12 months, it is a more palatable 21. So the P/E based on trailing earnings is a misleading indicator at the moment. Source: http://www.google.com/bookmarks/url?url=http://www.latimes.com/business/nationworld/wire/sns-ap-us-outlook-2010-stock-market,0,1298326.story&ei=c-ohS8vZGYjAoAPU96HaAg&sig2=8hBBb1D4BHAlzMBUXyUWnw&ct=b S&P’s chief investment strategist Sam Stovall:
The reason we’re trading at such an elevated P/E — currently 86 for the S&P 500, compared with the historical average of 16 — is that the most commonly used P/E ratio is based on earnings from the trailing 12 months. And in the fourth quarter of 2008 the S&P recorded its first loss ever in earnings. We don’t expect that to repeat itself.

Using estimates for 2010 earnings instead of the trailing 12 months, it is a more palatable 21. So the P/E based on trailing earnings is a misleading indicator at the moment.

Source: http://www.google.com/bookmarks/url?url=http://www.latimes.com/business/nationworld/wire/sns-ap-us-outlook-2010-stock-market,0,1298326.story&ei=c-ohS8vZGYjAoAPU96HaAg&sig2=8hBBb1D4BHAlzMBUXyUWnw&ct=b

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