S&P is trading for 10% less than its fair value. And indeed, there are a few thousand stocks right now trading for less than book value. That's a pretty impressive number of investment bargains. Interested in cashing in? Here's why book value might just be one of the most important metrics for 2008.
A P/B ratio of 1 would mean that a company is trading at a price equal to its assets per share, but ratios over 1 are commonplace. That's because there are a whole lot of other factors that play into stock prices, including future earnings, market sentiment, and the company's intangibles. It's when the book value gets below 1 that things get interesting.
of the S&P 500 is twice book. The market relative to the book value and dividends it pays is far cheaper than it's been in a long time," Bogle said in a recent MarketWatch interview. And that's not just the case in America right now.
According to Martin Morris of the U.K.'s Telegraph, one-third of stocks on the country's large-cap FTSE 100 index are trading at a discount to book value. According to Morris, "fifteen of the FTSE 100 companies are now trading at less than half of their book value, with troubled Royal Bank of Scotland ( RBS) ranked the lowest."