The Mental State of Mr. Market – July 2015
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 508 companies reviewed by ModernGraham. Each valuation can be found in the Valuation Index, available for free, or premium members can access more detailed information including screens and tables of the valuations.
This month, out of the 508 companies reviewed by ModernGraham, the average PEmg ratio (price over normalized earnings) is 25.24 and the average company is trading at 85.65% of its intrinsic value. Last month, the average PEmg ratio was 25.47 and the average company was trading at 85.65% of its intrinsic value.
The highest PEmg average we have seen while tracking this information was 26.17 in December 2014 while the lowest PEmg average was 24.29 in October 2014. The highest average intrinsic value was 93.48% in January 2015 and the lowest average intrinsic value was 85.65% in July 2015.
| Month | Average PEmg | Average % of value | Defensive % | Enterprising % | Speculative % | Undervalued % | Fairly Valued % | Overvalued % |
| August 2014 | 24.36 | 90.57% | n/a | n/a | n/a | n/a | n/a | n/a |
| September 2014 | 25.37 | 93.37% | n/a | n/a | n/a | n/a | n/a | n/a |
| October 2014 | 24.29 | 90.24% | 12% | 35% | 53% | 31% | 21% | 48% |
| November 2014 | 25.32 | 90.61% | 12% | 35% | 53% | 29% | 21% | 50% |
| December 2014 | 26.17 | 92.28% | 11% | 34% | 55% | 28% | 23% | 49% |
| January 2015 | 25.63 | 93.48% | 10% | 34% | 55% | 30% | 20% | 50% |
| February 2015 | 25.79 | 92.72% | 10% | 35% | 55% | 33% | 19% | 49% |
| March 2015 | 25.79 | 88.03% | 10% | 35% | 55% | 31% | 19% | 49% |
| April 2015 | 25.64 | 86.18% | 9.9% | 35.2% | 54.9% | 32.1% | 19.4% | 48.5% |
| May 2015 | 25.17 | 86.64% | 9.1% | 36.1% | 54.8% | 32.1% | 20.4% | 47.4% |
| June 2015 | 25.47 | 86.43% | 8.7% | 34.7% | 56.5% | 30.0% | 21.2% | 48.8% |
| July 2015 | 25.24 | 85.65% | 9.6% | 33.1% | 57.3% | 30.9% | 19.3% | 49.6% |
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