One out of every 10 companies in the S&P 500 index -- including stalwarts like Apple and JPMorgan Chase -- is now cheaper than during the 2008-2009 market meltdown.
Even as S&P 500 earnings soar past Wall Street estimates quarter after quarter, the lack of investor confidence has dropped the forward price-to-earnings ratio of at least 50 of the largest U.S. companies below their crisis lows, according to a screen of Thomson Reuters data.
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Investors are now willing to risk less cash for every $1 in earnings they expect to rake in for upcoming quarters than they were in 2008 or 2009.
The companies in question are not exactly obscure. Besides Apple Inc
"Risk aversion is so great right now that high quality U.S. common stocks are on sale," said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.
Thomson Reuters data shows that 72 percent of the S&P 500 components beat earnings expectations in the second quarter. Estimates updated Tuesday show full-year earnings growth is seen at 14.1 percent for 2012 --just 0.2 percentage point less than the estimate on July 1, and still higher than the 13.6 percent estimate on April 1.
By sector, technology, financials and consumer discretionary shares are trading at valuations not far from their 10-year lows.
"It shows an incredible drop in overall confidence, not only in financial markets but in the political environment," said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
"Knowing we are going into a political election year (investors) haven't embraced what we would consider a decent, steady flow of good earnings."
Apple shares are up 350 percent since the start of 2009, while the company's forward P/E ratio has fallen to 12.29, down from 15.52 in late November 2008. Apple is one of those companies whose share price is not keeping up with its rapid growth in earnings.
Other companies on the list are not growing as rapidly. Wal-Mart has seen same-store sales fall every quarter for two years now. Hewlett-Packard Co
But some of the names are stronger: The second-biggest U.S. bank by assets, JPMorgan, with its stock up more than 19 percent since the start of 2009, has seen its forward P/E decline to 6.63 from 9.44 in January 2008.
"You have a company with a $200 billion market cap like some of these are, and to make that go up you need a lot of capital inflows," said Harbor Advisory's De Gan. "We've seen the P/E on some of these stocks basically decline for 10 years; at some point it becomes ridiculous."
(Reporting by Rodrigo Campos; Editing by Leslie Adler)