Apple Inc. (AAPL) is 14% Overvalued, S&P 500 16%: Canadian Fund Manager

Abramson also shared his latest views about the markets in a short letter.

“Finding compelling undervalued large cap names in the U.S. is currently a tough task. With a trailing 12 month P/E ratio of 19x, the S&P 500 is hardly a bargain. Large cap U.S. stocks also appear to be expensive through the lens of our proprietary valuation model, TVM . The average price-to-TVM for the constituents that comprise the S&P 500 now stands at 116%. Mega caps are less expensive but still close to fair value. For example, Table 1 lists the current trailing 12-month P/E ratios and P/TVMTM values for the ten highest weighted stocks in the S&P 500. As a group they are cheaper than the overall S&P 500 but still not attractive,” Abramson said.

Here is a copy of Table 1:

Trapeze Asset Management is having a hard time finding any attractive investments.

“The few names that do appear on our radar screen are either in sectors experiencing considerable headwinds (e.g., Energy, Materials and Financials) or have negative analyst earnings estimate revisions (e.g., McDonald’s, Owens-Illinois), which our research has shown to be the best value trap predictor” said Abramson.

We should note that no valuation model is 100% accurate; however, it is also clear that value investors have been dumping their Apple Inc. holdings over the last few months. Earlier this month we shared why value investor Jim Roumell sold his long-time Apple holdings. Apple is still the most popular stock among hedge funds, but there is a significant decline in its popularity. Overall, Apple is an under-owned stock by hedge funds, which collectively own just 3.2% of Apple’s outstanding shares.

Disclosure: None