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By PhoolishPhilip
October 27, 2008

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I just took a quick look at the Dow 30 reports freely available at Valueline and was surprised to see how many are trading at 17 year lows on a price to earnings basis. Of the 30 in the index the following stocks haven't traded this low since before the recession of the early 1990's: Boeing, Dupont, 3M, American Express, Caterpillar, Chevron, Coca Cola, Disney, Exxon Mobil, HP, Home Depot, IBM, Kraft Foods, and Microsoft. That's nearly half the index trading at multi-decade lows. Sure earnings are likely to contract, and sure a lot of these companies are loaded with debt, but do you really think they are going to see a complete collapse of earnings and the risk of bankruptcy? Exxon and Microsoft have a sick amount of cash on the balance sheets, and Coca Cola may be cheaper than when Buffett last loaded up on the shares.

On a dividend basis alone a lot of these companies are attractive, especially when you consider that they are setting at multiple decade lows on a PE basis. Hell, Kraft and Chevron offer nearly 4%, which is better than 10 Year Treasuries, while Coke is offers 3.3% for your money while you wait for the depression to send us all back to hunting and gathering. This is truely insane.

Unless you think the economy is going into a great depression worse than the original great depression, Mr. Market is offering up a once in a life time bargain for many of the strongest companies in the Dow. How wrong can you go buying AXP, Chevron, KO, IBM, KFT, and UTX at yields of 2-4% and PEs of multi decade lows? I know I'm going to be looking a little more closely at some of these stalwarts.

One final point: I am convinced that much of this selling, which the media attributes to fear of an economic collapse, is technical in nature. That is a lot of Hedgies and banks are delevering and forcing down these relatively safe companies.