3 Best Buys of the Nasdaq Right Now
A good stock to buy will often have three qualities: It's a good business, it's in a growing industry, and it trades at an attractive valuation. On the first two points, good companies abound, and there are clear secular trends propelling innovation. But few stocks trade at an attractive valuation right now.
Consider one of the most popular valuation metrics, the price-to-earnings ratio. The P/E average for the S&P 500 just five years ago was around 24. As I type, the average is at 40. Therefore, you could say the market is 67% more expensive now compared to its past self.
And the same pricey picture is painted for many individual stocks when comparing their past valuations to the present. It's clear there are great companies with great growth prospects deserving of a premium valuation, but it's hard to call them a bargain no matter how you slice it.
Source Fool.com
