All You ‘Fraidy Cats May Have Overbought Defensive Stocks
Jack Hough had an interesting observation in this week’s Wall Street Journal: jittery investors have driven up the price of defensive stocks. He cited as an example evergreen stock General Mills (GIS) and Caterpillar (CAT), a more cyclical stock.
General Mills’ price to earnings ratio shows investors are willing to pay a premium for the defensive stock – its earnings trade for 1.6 times those of Caterpillar. That may mean Caterpillar’s selling for a discount, and YCharts Pro considers it undervalued.
Fresh off a labor dispute, it has higher revenue growth.
It also has higher return on equity.
And check out the net income chart.
Jack thinks defensive investors may have gone too far.