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Investors Prowl for a Good Buy

One of the most closely watched measures of stock value is known as the price-earnings ratio, or P-E. This measurement is currently at an all-time low, lower even than the ratios at the bottom of the last bear market. Some investors are panicking, and losing money. Others are looking at this as a sale!

Since a P-E shows how much investors are willing to pay per dollar earned by a company, in theory, the lower the P-E, the better the buy on the stocks. David Sowerby of Loomis Sayles says that investors will have to go back a long time to find a market in such a good position, in terms of valuation. What that means is that while the P-E is low, now’s the time to buy.

So, for those looking to buy, here’s a couple stocks that have a P-E of 8 or less (and they‘re all on the S&P 500):

Qwest (Q)

Make no mistake, there’s some risk in taking on an investment with Qwest. The telecom industry has suffered some anyway with cable companies offering combo products, but Qwest is hit on other fronts as well. Because most consumers are using cell phones these days and Qwest doesn’t have a large presence in that arena, they’ve taken some losses, which is why their P-E is 2.5; however, they survive because they keep their losses to a minimum by focusing on business customers and lower overhead expenses.

Regions Financial (RF)

We know what you’re thinking, why would you invest in any bank right now? Well, that’s precisely why it could be a good idea, according to some. Because the credit crisis hasn’t passed yet, the stocks are at a great price. If chosen wisely, when the banking industry rebounds, there’s a good chance of making a ton of money. Regions Financial makes the list because the P-E is less than 8, but regulators are clearly not concerned with Regions portfolio failing, as evidenced by the $900 million in deposits that it took in when Fed closed down the Georgia bank last week.

Clearly there’s a bit of a gamble in taking on companies such as these; however, experts say in terms of valuation, the market offers a very compelling return. Do you think you’d invest in companies like these? Do you hold any stocks currently with P-E ratios less than 8? [USA Today]

Posted: 9/3/08