Is The Market Expensive?

I’m frequently asked: Is the Market Expensive? 

Value is Subjective:

I believe the answer is very subjective. My standard response is:  “Value, like beauty, is in the eye of the beholder.” -Adam Sarhan

P/E Ratio:

The P/E ratio is a common ratio used to measure a market (or stock’s ) value. The ratio is derived by dividing the price by earnings. There are many different types of P/E ratios but for the most common used is trailing twelve months (a.k.a. TTM). From an objective standpoint- the S&P 500’s (SPX) current P/E ratio is ~18. Historically, this is around “fair value” (mid teens) and it is currently lower than prior major market tops. In fact, the past two major market tops are highlighted below and the SPX’s P/E ratio was above 21 in both instances.

Cheap or Expensive:

Value is subjective because from 1984-2014 the SPX soared over 1,000% (from 165-1950). During that time, the P/E ratio was above 20 for 18 years and below 20 for 13 years- Hardly conclusive evidence. So, is the market expensive? Not from where I sit.

S&P 500 (SPX) P/E Ratio:

SPX-PE Ratio

Adam Sarhan Reuters Quote: US STOCKS-Wall Street flat after data

US STOCKS-Wall Street flat after data 6.4.14

* ISM services report strong, but ADP report weak

* Many investors worry about low volume and volatility

* Protective Life jumps, Dai-ichi to buy

* NQ Mobile has biggest gain ever, up 28 pct

* Dow down 0.2 pct, S&P down 0.1 pct, Nasdaq up 0.1 pct (Updates to open, adds ISM data)

By Ryan Vlastelica

NEW YORK, June 4 (Reuters) – U.S. stocks were largely flat on Wednesday as mixed reads on the economy gave the market little direction and traders were reluctant to buy with indexes near record levels.

Wall Street initially opened lower, pressured by a disappointing read on the labor market, but it subsequently cut its losses on a bullish read on the services sector. Trading volume continued to be light, making the market more susceptible to intraday swings and suggesting that recent gains lacked conviction.

The Institute for Supply Management’s non-manufacturing index accelerated more than expected in May, rising at the fastest pace in nine months. Separately, fewer private sector jobs were added in May than had been anticipated, according to the ADP National Employment Report.

“With some data strong and other data weak, we don’t have a clear picture of the market or the economy right now,” said Adam Sarhan, chief executive of Sarhan Capital in New York. “We don’t seem to be strong enough to grow without help from the Federal Reserve, but we do seem to be trending in the right direction.”

While economic reports have largely been positive lately, investors are concerned about any data that could indicate weakness in Friday’s May jobs report.

The Dow Jones industrial average fell 28.72 points or 0.17 percent, to 16,693.62, the S&P 500 lost 1.1 points or 0.06 percent, to 1,923.14 and the Nasdaq Composite added 4.57 points or 0.11 percent, to 4,238.65.

Equities have been strong lately, with the S&P up for seven of the past nine sessions, hitting multiple records.

The CBOE Volatility index was up 2.2 percent, its third straight daily advance. Despite that, the “fear index” remains around 12, well below the historical average of 20, which has some investors concerned the market has become complacent.

In company news, Protective Life jumped 18 percent to $69.25 in heavy trading after Japan’s Dai-ichi Life Insurance Co agreed to buy the company for $5.7 billion.

Tibco Software Inc was one of the Nasdaq’s most active, slumping 8.2 percent to $19.10 a day after a second-quarter outlook sharply below expectations.

NQ Mobile Inc soared 28 percent to $9.80, its biggest one-day advance ever, moving on heavy volume after the mobile security software maker said a special committee had found no evidence of fraud, as had been alleged by short-seller Muddy Waters Research Group. (Editing by Bernadette Baum and Nick Zieminski


An Easy Way To Beat The Market…

Own Leading Stocks

An easy way to beat the market is to find and own leading stocks. Put simply, that is exactly what you get with your FindLeadingStocks Membership. We receive quite a few emails asking us what is included in a FLS Membership. So we decided to give you a glimpse of some of our work (below is an excerpt from an intra-week update, not our weekly report). In addition, to sending you how to read the tape (navigate the market in real-time), you get advanced (a.k.a early) entry points in leading stocks, new high quality trade setups each week and access to our special reports (only available here).

Make Rational, Not Emotional, Decisions

All our entry/exit orders are placed when the market is CLOSED (typically, over the weekend) so you know exactly what to do if/when a stock moves through our predetermined entry/exit points when the market is open. This takes the guess work out of trading and gives you a solid plan, all you have to do is follow it. Additionally, this approach provides full transparency with our members, allows us to remove our emotions from the decision making process and remain objective at all times.

Would You Place This Trade? 

Join FLS– Make Money & Learn How To Navigate The Stock Market

If You Don’t, Cancel Anytime. That Simple.

Your Max Risk is Less Than $3/Day & There Are No Contracts

Special Gift For YOU
Become A Member Now, Enter Coupon Code: WIN
 & Save 10%When You Check Out (Hurry, Limited Qty’s) 


FLS Sample (Intra-week update, not our weekly report)

Market Update: Bulls Are Back In Control

Path of Least Resistance Is Higher:
The S&P 500 (SPX) broke out of its 5.5 month base last week which bodes well for the bulls. It is also encouraging to see the Nasdaq 100 (QQQ) break out and hit fresh 2014 highs as well. In the very short term the market is a little extended/overbought and we’d like to see a light volume pullback before making its next move higher. The DJIA, Nasdaq Composite, Russell 2000 are still trading below their 2014 highs and the bulls would like to see these indices follow through to the upside.

Buy Weakness, Not Just Strength, in An Uptrend
In a strong bull market we like to buy weakness and not just strength since it gives us a nice (and very important) edge in the market.  Earlier this year, we wrote about how the market was in the process of building a large topping pattern and noted that we needed the top to be confirmed otherwise it would be a large base within a broader uptrend. Now that the SPX broke out, the latter scenario has occurred and the bulls are back in control as long as the SPX continues trading above 1897 (resistance should now become support).

Market Update: Consolidating Recent  Gains

So far the action this week is best described as a healthy consolidation ahead of a few key data points (Mainly, European Central Bank & US Jobs Report later this week).  The small-cap Russell 2000 index remains the weakest index but has the look/feel that it is just a matter of time until it rallies (providing, the other averages continue moving higher).

Positions: Results Are Results. Period.

Thankfully, the  FLS portfolio is doing great as every position is profitable and our stops are tightened to avoid anything turning negative. SWKS was the standout winner today, jumping a very healthy 6% today alone! This stock took some time to get going but hopefully this is the beginning of a nice long uptrend. Here is a snapshot of the portfolio as of Tuesday’s close,

A. The service owns: SPY +4.39%, AAPL +12.10%, SWKS +7.36%, XLV +2.34%, NFLX +17.79%, JAZZ +5.89%, FB +2.06%, GLL +4.11%

B. The service will exit: SPY @186.37, AAPL @596, SWKS @39.85, XLV @58.61, NFLX @392, JAZZ @135.27, FB @61.27, GLL @89.68

Working orders: (Real Orders Are Only Available For FLS Members)

Status Order Ticker         Buy Stop    Protective Sell Stop      Risk From Entry
Working Buy XYZ 45 43.78 -2.71%
Working Buy XYZ 125 119 -4.80%



Why Don’t You Give It A Try?

If you are a serious investor and interested in joining, try us for a few months and see if the service is for you: Click Here. Remember, if you are not 100% happy with our work (making money), there are no contracts so you are free to cancel anytime (no questions asked). The real question is: Why wouldn’t you give it  try? 

Enter Coupon Code: WIN

& Instantly Save -10% At Signup (Hurry, Limited-Quantities)

The Future of The Digital Media Business

“It Is Not the Strongest of the Species that Survives But the Most Adaptable.”
― Charles Darwin
Digital Media 1.0 Is Dead:
Earlier today, Todd Harrison, of MinyanVille Fame, penned a great piece titled “Why I’m Exiting The Digital Media Business.” Once again he is way ahead of his time and has his finger right on the pulse of the ever-changing financial landscape. His basic premise is that Digital Media, as we once knew it, is dead.I couldn’t agree more and feel that the old financial services business model is dead as well (but that will be covered in a separate article). The digital media business has changed materially in recent years, become extremely saturated, and now needs to evolve in order to survive. All this was due to the explosion of social media, blogs, and a very low barrier to entry.
Why It Died. Brain Cells Not Required:
Put simply, anyone with a keyboard and internet access (brain cells not required) can begin writing about finance. This destroyed the old digital media landscape and caused a tremendous amount of confusion from the investor’s (people consuming the digital media)  point of view. Why? Because they do not know how to separate the good guys from the shysters. As is this case in any business, there are shysters lurking in every corner. This opened the door for shysters to package and sell garbage to countless people who are not able to differentiate between good and bad players in the digital media space. As a result, trust disappeared and the business model broke. As is the case with most things in life the business evolved and thought leaders and trust agents are emerging. The business is becoming personalized and people succeed by providing intelligent content in both bull and bear markets.
The Future: Digital Media 2.0
So if Digital Media is dead. Where are we headed? From where I sit, Digital Media 2.0 offers HUGE opportunities for the good guys (honest, intelligent, true value-add oriented people) to provide intelligent content to their audience. Why? Because in an information-overload world- the audience needs, now more than ever, good/intelligent ideas and will gladly pay for it…Finding it is their main problem. The decision to buy (subscribe), once trust and quality are established, in the consumers mind, is a no-brainer.
Age of Information: The Most Valuable Commodity In the World
We live in the age of information and in today’s world, information is the most valuable commodity in the world and time is the most valuable asset. Period. People who understand the value of intelligent information are willing to pay for it. Why? Because the benefit of accessing good information is priceless in today’s world. Remember, people don’t buy products, they buy what they get out of the product (hat tip, Jeffrey Fox). For example, the optometrist doesn’t sell glasses, she sells vision. Similarly, the investor who consumes financial media isn’t buying “research” or subscribing to a newsletter- they are buying money and saving time. The implicit value proposition is that when you subscribe to my XYZ service, you will make money from my ideas and save time because I will do the work for you). If you are not able to deliver and make that value proposition abundantly clear, you will not survive in the age of information. If it is, you will thrive.
How to Thrive In The New Age of Information:
That is why in order to survive and thrive in the new digital media 2.0 world – content providers have to deliver quality, personalized and intelligent content to the right audience- over and over again. If you can do that – you have just gained a customer for life. Intelligent content that shows readers how to save time and make money is priceless. Otherwise, the customer will “opt-out,” cancel, and go somewhere else. That simple.
Case Study:  Sarhan Capital
Sarhan Capital is a boutique investment/advisory firm. We thrive by providing intelligent information to our clients (investors of all size). That simple. If we don’t they leave. If we do, they stay- and become clients for life.
3 Step Formula For Success In the Digital Media Age
Permission Marketing is much more effective than interruption marketing. In today’s world people give you permission to market to them. They choose to opt-in to what you have to offer- Providing your content is personalized and valuable to them. This is our secret sauce and one reason why we are able to thrive in the new digital media world:
Step 1: Strangers become Friends (Join our free newsletter, watch our free webinars and get to know our work)
Step 2: Friends become clients (Want more- Join our paid services)
Step 3: Clients become loyal clients (Give people a reason to come back for more – provide excellent content). Rinse wash repeat.
In any business, the future is very bright for those that are able to best manage change.
Trade wisely,
Adam Sarhan
Stocks: Join Adam Sarhan’s Report and Learn How To Navigate The Stock Market, Get New Trade Setups and Long/Short Signals in Leading Stocks
Options: Want to Trade Options? Get long/short ideas directly to your inbox, Try Adam Sarhan’s


Adam Sarhan Appearance In A Danish Documentary- The American Dream

Dear Friends,

In Jan 2014, Adam Sarhan was invited to appear in a Danish Documentary about “The American Dream.” His appearance (7:18-11min mark) is in their New York segment:

Kind regards,

Sarhan Capital