This morning, I was updating my portfolio and I realized that my average forward PE was close to 30 (29 to be precise).
I own 24 stocks. I really like all of them. But, I'm worried about the increase of their forward PE ratio. Some stocks had a forward PE of 20 before the crisis and the recent negative perspectives have had a negative impact on forward earnings. So, many stocks are now more expensive than before COVID.
The cheapest stocks are in retail and I don't think that it's the best place to invest money now. There are still some excellent names in retail (Ross Stores, TJX, Dollarama, Couche-Tard) but some of them have been closed for months and they'll carry that absence of revenues for a long time even if they're very well managed. So, why should I sell some Microsoft shares to buy more Ross Stores shares? Just because Ross is less expensive and I want to reduce my global forward PE ratio?
You see, there's no escape from a high PE. Actually, the only escape is selling stocks to own cash and I don't think it's appropriate.
My cheapest stock has a forward PE of 16 while my most expensive stock has a forward PE of 100. Between these extremes, I own many stocks with a FWD PE of 30 or more. I'm not comfortable with that kind of high PE. The cure to that would be to buy stocks with less quality. I wouldn't be comfortable with that either.
Do you have a solution?