For value investors, the past few weeks have been a tumultuous time. Traditional valuation yardsticks don't really seem to count for much in a market maelstrom obsessed by global depressions and financial meltdown. In these circumstances the more traditional way that value enthusiasts analyse the equity markets seems to have broken down. Until very, very recently you couldn't find a lot of companies valued at substantially less than tangible book value – that seemed to be a relic of the 1930s. Even more importantly, you couldn't buy lots of high-quality blue-chip large caps trading at single-digit price-earnings (PE) ratios, with dividend yields in the high single digits. Not any more – times have changed and suddenly value investors are presented with hundreds of companies that fit even the strictest value criteria.
That point was highlighted recently by Warren Buffett in an article for the New York Times. He said that he had started to put his own money into US shares, arguing that: "What is likely is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over."
He also said: "I don't like to opine on the stock market, and again I emphasize that I have no idea what the market will do in the short term. Nevertheless, I'll follow the lead of a restaurant that opened in an empty bank building and then advertised: 'Put your mouth where your money was.' Today my money and my mouth both say equities."