Market P/E ratios

Over the years, I’ve developed a rigorous framework of entry and exit points based on adjusted (net cash) P/E ratios for the companies in my portfolio. In short, I target companies with an adjusted P/E below half of the market average and hold them until they reach this average or meet other exit criteria in the meantime.

As shown in the attached, these benchmarks vary across countries, and I adjust for the company's origin versus the stock’s exchange (e.g., Chinese stocks on the NYSE) to better reflect the business environment. Currently, several markets are trading above their 5-year averages, so I’m aligning the portfolio with these historical averages for a more cautious approach.