Even after the biggest rally since the 1930s, U.S. stocks remain the cheapest in two decades as the economy improves.
Profit estimates for Standard & Poor’s 500 Index companies from Apple Inc. to Intel Corp. and CSX Corp. climbed 9.1 percent on average in April through the end of last week, twice the gain in their prices and the largest monthly increase since at least 2006, data compiled by Bloomberg show. The benchmark gauge for American equities is trading at 14.2 times forecasts for its companies’ earnings, lower than any time since 1990, except for the months after Lehman Brothers Holdings Inc. collapsed.
Income is beating analysts’ estimates by 22 percent in the first quarter, making investors even more bullish that the rally will continue after the index climbed 80 percent since March 2009. While bears say the economy’s recovery is too weak for earnings to keep up the momentum, Fisher Investments and BlackRock Inc. are snapping up companies whose results are most tied to economic expansion.
“The stock market is incredibly inexpensive,” said Kevin Rendino, who manages $11 billion in Plainsboro, New Jersey, for BlackRock, the world’s largest asset manager. “I don’t know how the bears can argue against how well corporations are doing.”