Tags: Dreman | Stocks | Cheapest | buy

David Dreman: Stocks at Cheapest Levels Since 1982 so Buy Now

By    |   Thursday, 02 Feb 2012 02:01 PM

Star money manager David Dreman says stocks are trading at their cheapest valuations since 1982, making them a very attractive investment now.

“The averages are way down,” he tells Forbes Media Chairman Steve Forbes.

In 2000 the Standard & Poor’s 500 Index traded about 28 times earnings, says Dreman, chairman of Dreman Value Management. Normally, it trades at about 17 or 18. And now, based on 2012 earnings, it’s at about 14 or 15.

“So it’s very cheap,” he says. “Companies are strong, cash flow is good, finances are probably the best they’ve been in years.”

The biggest problem now is fear, Dreman says. “People are just terrified to go near stocks at this point,” he says.

“These huge outflows, out of mutual funds – $200-$300 billion last year alone – have made people just want to be out of the market, because of the huge volatility and the belief that this depression-like environment will go on for forever.”

One of Dreman’s favorite stocks is United Technologies. “It’s been very profitable over a very long period of time with Otis Elevator, jet engines. . . . They’ve shown earnings growth of 10 percent, 12 percent a year.”

Many other experts have turned bullish on stocks too, but that doesn’t mean it will be a straight line up. “We suspect stocks are due for a near-term correction,” Gina Martin Adams, a strategist at Wells Fargo, wrote in a Jan. 30 report, according to Bloomberg.

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2012-01-02
Thursday, 02 Feb 2012 02:01 PM
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