Wednesday, November 18, 2009

S&P500 Sector Snapshot

With the earnings picture for 2009 and 2010 changing by the day, it's useful to take a look at Price-to-Sales as a measure of valuation. It doesn't have nearly the same volatility that Price-to-Earnings does.

The below chart shows each sector's discount (or premium) to 10year average Price-to-Sales ratios. Not surprisingly, Consumer Staples stocks ("necessity" products) trade at a premium, as a safe-haven during economic upheaval.

Tech shares trade at a 40% discount, despite having the highest expectations for five year earnings growth.

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