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Only One S&P 500 Sector Trades Below Its Economic Book Value

Only One S&P 500 Sector Trades Below Its Economic Book Value

This report analyzes[1] market cap, economic book value, and price-to-economic book value (PEBV) ratio for the S&P 500 and each of its sectors.

I analyze other fundamental and valuation metrics for the S&P 500 and its sectors in these reports:

These reports leverage cutting-edge technology to provide clients with a cleaner and more comprehensive view of every measure of profits[2]. Investors armed with my firm’s research enjoy a differentiated and more informed view of the fundamentals and valuations of companies and sectors.

S&P 500 PEBV Ratio Jumps to Highest Level Since September 2018

The PEBV ratio for the S&P 500 rose from 1.1 at the end of 2019 to 1.7 through 2Q20, or its highest level since mid-2018, and one of the highest levels since 2004. See Figure 1. This ratio measures the level of expectations for future profits compared to existing profit. At 1.7, the S&P 500’s valuation implies the profits of the S&P 500 will increase 70% from current levels.

Only one S&P 500 sector trades below its economic book value (excluding Energy, which has a negative economic book value), as I’ll show below.

Figure 1: TTM PEBV Ratio for the S&P 500 From December 2004 – 8/11/20

Ranking the S&P 500 Sectors by PEBV Ratio

Figure 2 ranks all 11 S&P 500 sectors by change in PEBV ratio from the end of 2019 to 8/11/20.

Figure 2: TTM PEBV Ratio as of 8/11/20 by Sector

With a PEBV of 0.9, investors expect the Financials sector’s profits to decline, permanently, by 10% from current levels. On the flip side, investors expect the Real Estate sector to improve profits more than any

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Warren Buffett bought Microsoft stock after meeting Bill Gates and made a $37 billion acquisition thanks to a chance encounter. Here are his 10 best quotes from an interview in a new book.

Warren Buffett bought Microsoft stock after meeting Bill Gates and made a $37 billion acquisition thanks to a chance encounter. Here are his 10 best quotes from an interview in a new book.



Warren Buffett wearing a suit and tie: Warren Buffett, co-chair of the 10,000 Small Businesses Advisory Council, takes part in a panel discussion following a news conference announcing a $20 million partnership to bring Goldman Sachs' 10,000 Small Businesses initiative to the city of Detroit, Michigan, November 26, 2013. REUTERS/Rebecca Cook


© REUTERS/Rebecca Cook
Warren Buffett, co-chair of the 10,000 Small Businesses Advisory Council, takes part in a panel discussion following a news conference announcing a $20 million partnership to bring Goldman Sachs’ 10,000 Small Businesses initiative to the city of Detroit, Michigan, November 26, 2013. REUTERS/Rebecca Cook

  • Warren Buffett gave investing advice to Bob Woodward, purchased Microsoft stock after meeting Bill Gates, and struck a $37 billion deal thanks to a chance meeting, he told David Rubenstein in “How to Lead: Wisdom from the World’s Greatest CEOs, Founders, and Game Changers.”
  • The famed investor and Berkshire Hathaway CEO also touched on railroads, his annual shareholder letters, his retirement plans, and his company’s future in the interview with the co-executive chairman of The Carlyle Group.
  • Scroll down to read Buffett’s 10 best quotes from the discussion.
  • Visit Business Insider’s homepage for more stories.

Warren Buffett gave investing advice to investigative journalist Bob Woodward, bought 100 Microsoft shares after meeting Bill Gates, and made a $37 billion acquisition because of a chance encounter, he told David Rubenstein in an interview for “How to Lead: Wisdom from the World’s Greatest CEOs, Founders, and Game Changers.”

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Rubenstein, the cofounder and co-executive chairman of The Carlyle Group, published the book in September. He spoke to Buffett, a billionaire investor and the CEO of Berkshire Hathaway, in 2016.

Here are Buffett’s 10 best quotes from the interview:

1. “The railroad business had a bad century. They’re kind of like the Chicago Cubs. Everybody has a bad century now and then” — on Berkshire’s purchase of the Burlington Northern Santa Fe railroad in 2009.

2. “I bought 100 shares just to keep track of what this young kid was doing” — on his early relationship with Microsoft cofounder Bill Gates. Buffett likely spent less than

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