April 26 (Bloomberg) -- Even after the biggest rally since the 1930s, U.S. stocks remain the cheapest in two decades as the economy improves.
Earnings 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, 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’ profits, lower than any time since 1990, except for the six 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.”
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“We’re in a time period where the concerns we had in 2007 and 2008 have been taken care of or are past,” Kenneth Fisher, who oversees about $40 billion as chairman of Fisher Investments in Woodside, California, said in a April 20 Bloomberg Television interview. “If you’re waiting for a market pullback or individual stock pullbacks, you could be waiting a long time.”
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“The earnings story is very supportive of the market even after the rally over the last year,” said Liz Ann Sonders, chief investment strategist at Charles Schwab Corp., which oversees $1.4 trillion in client assets from San Francisco. “The recovery is real, it’s V-shaped and it’s got legs.”
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Stocks in U.S. Cheapest Since 1990 as Analysts Boost Estimates - BusinessWeek