At the time of potential Global Economic Armageddon (Nov 2008) quality names were selling at a huge discount. The three I currently care about, as they can be compared via normalized earnings, are GOOG, AAPL and IBM.
The three stocks show their bottoms in Nov 2008, and subsequently their lowest valuations. Lets see how their valuations compare today...
Nov 2008 GOOG was trading with a trailing PE of 16. At the SP500 low, in March 2009, GOOG was trading with a PE of 21. As of Friday, GOOG is trading with a trailing PE of 26. (Assuming GOOG does 27 eps in 2010, GOOG is trading with a 2010 PE of 19.)
Does the valuation, in a relatively stable economy, for the most efficient method of advertisement (as per ROI) make sense? Did EPS growth stop? Will EPS growth reverse? Did the growth in YouTube irrelevant?
Nov 2008 AAPL was trading with a trailing PE of 14-15. It maintained its lower valuation, despite have the best products, and years a head of any competitor (and still are years ahead), due to the health issues of Steve Jobs. As of Friday, AAPL is trading with a trailing PE of around 20. But the new accounting makes AAPL look that much more inexpensive at the rate they are selling their products/services.
It is a dirt cheap stock, especially with iPad. Many are critical of it, but those people do not understand. (But I don't hold it against those people because 'they' visionaries. They do not see the world as it could be, they see the world as it was.) Not to mention the things they got going on in the pipeline with respect to the iPhone and mobile advertising.
The only deterrent against AAPL is Steve Jobs' health. The stock will crater if anything should happen to him. However, the culture of innovation is ingrained in AAPL, and the product line up and developments will mean Apple will continue with very nice EPS growth for the next few years, at least.
Nov 2008 IBM was trading with a trailing PE of 8.5. At the SP500 low, in March 2009, IBM was trading with a PE of 9. As of Friday, IBM is trading with a trailing PE of 12. (Assuming IBM does "at least 11 eps" in 2010, as indicated in the conference call in the previous earnings report which blew away all analyst metrics, IBM is trading with a 2010 PE of 11.)
Does this make sense? Did those selling IBM listen to the Conference Call? please re-visit my post
The fact remains, the market is not in the same situation as it was in November 2008. Valuations should not approach those of Nov 2008, and I would argue they should not approach those of March 2008.