Thursday, January 22, 2009

A tepid outlook, but also modest valuation

Most of my holdings fell with the broader indexes today; an exception was Potash (9.4% of portfolio). They reported very strong earnings, but issued a subdued outlook for 2009. But even if estimates were to be slashed further throughout the year (say, to $7.00 per share), the P/E would still be modest (around 10 in this example). So it is a classic case of very bad conditions already priced into the stock. That was evidenced today, as the stock rose steadily all day after initial weakness.