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Much of other people’s panic selling has been to meet margin calls – and not just on stocks, but on commodities or any other financial instrument or derivative where the dealer or bank demanded more collateral/cash. This is forced selling and often leads to good buying opportunities.

We measure that opportunity by waiting until 10% or less of the S&P 500 – 50 stocks or less – are trading above their 50 day moving average. Last night it was under 5%!

The market was so oversold yesterday that we started to buy some of our favorites and some of our stocks that have been on the “list” but that were previously too expensive. We bought IBM and GOOGL.

intrinsic value

Valuation
Our weighted average Stock Price to Intrinsic Value measure got as high as 26% last night. This measure has been near zero for 18 months, which means we did not have a margin of safety in the portfolio, which is why we hedged our large unrealized gains. Only a few stocks over that period reached their Sell Above prices though – they have been sold.

The 12 month forward Price to Earnings ratio on the S&P 500 is down to 15x; it was almost 18x in February. The average for 100 years is about 16x. Valuation has come back in line.

How’d We Do?
With Wednesday’s incredible rally of 600 points on the Dow, we pulled close to breakeven for the year in the ValueAligned® Portfolio and the Hedge Fund.

intrinsic value

The “market” represented by the S&P 500 index is down -5.8%; if we add dividends, it’s down -4.5%.

I can’t tell you what will happen next, but we are prepared for it.