Are N.Z. Equities too expensive ?

[Beagle]

https://www.goodreturns.co.nz/articl...9+January+2018

Good fodder for debate here. I suspect like all statistics it depends upon how you interpret the numbers and the truth is probably somewhere in the middle. It one assumes the forward PE for the market as a whole is about 21 and the average for the last decade is just 16 is another 5 PE warranted with ultra low interest rates and a reasonable growth outlook ? What if interest rates rise in 2018 and 2019 ?

My take on this.
- Stellar growth companies like ATM FPH Synlait e.t.c. are skewing the data a bit.
- Some other large companies with modest growth prospects like POT and AIA are over priced and are impacting the data further.
- Safe large utility companies like all the gentailiers are trading on yield derived from free cash flow and the high PE's of that's sector are impacting the data even further.
- With a market average forward PE of 16 for the last decade in mind I think if you can find companies on a forward PE of less than 18 with reasonable growth prospects that could be one quite useful filter to apply as a stock selection marker. If sound growth prospects come at a PE of less than 16 it might be time to open the cheque book in a meaningful way.
- Some of the retirement stocks for example meet that criteria very nicely and have prevailing tailwinds for the next ~ 25 years.
- On the other hand holding stocks just for yield might be a little riskier than it was in years past as we enter a rising interest rate environment.
- Some diversification overseas seems to make good common sense with the currency where it now is.