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Index investors are celebrating what is, so far, an amazing year.
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Does this seem crazy? It is.
Market Valuations Are Dangerously High
| Weekly Decline In S&P EPS Consensus | Last Week’s EPS Consensus | Year | EPS Consensus | YOY Growth | Forward PE |
| 0.00% | $206.58 | 2021 | $206.58 | 50.43% | 22.1 |
| 0.00% | $215.93 | 2022 | $215.93 | 4.53% | 21.2 |
| -0.98% | $219.09 | 2023 | $216.94 | 0.47% | 21.1 |
| -0.45% | $245.20 | 2024 | $244.10 | 12.52% | 18.7 |
| -0.09% | $274.26 | 2025 | $274.01 | 12.25% | 16.7 |
| Recession-Adjusted Forward PE | Historical 2024 EPS (Including Recession) | 12-Month forward EPS | 12-Month Forward PE (No Recession) | Historical Overvaluation (no recession) | PEG |
| 21.51 (27% overvalued) | $212.37 | $232.61 | 19.636 | 16.67% | 2.31 |
(Source: DK S&P Valuation Tool.)
Even if we don’t get a recession, and ignoring the fact that interest rates will have gone up 5.25% in 18 months, the S&P 500’s (SP500) nearly 20X forward earnings is reckless.
If you factor in the recession that the bond market is 100% confident is coming within a year? Then the S&P is 27% overvalued, and trading at 22X forward earnings.
- January 4th, 2022 the start of the bear market: 22X forward earnings.
So rates are up 5.25% since January 2022 and yet the market is trading at the same multiple? Does that sound logical to you? To me it sounds like a violation of all the laws of God, Man, math, and common sense!
Daily Shot
Compared to bonds, stocks are the worst deal they’ve been in 20 years!
Does that tell us when the market will fall? Nope.
It does guarantee with 90% statistical certainty much lower returns in the next decade though.
Always A Market Of Stocks Not A Stock Market
The S&P 500 is pretty much flat this year, it’s the S&P 8 listed below that are raging higher.
| Company | Market Cap | % of S&P Gains |
|---|---|---|
| Apple | $2.8 trillion | 25.4% |
| Microsoft | $2.2 trillion | 17.2% |
| Amazon | $1.7 trillion | 12.6% |
| Alphabet | $1.6 trillion | 11.3% |
| Tesla | $1.1 trillion | 8.5% |
| Meta | $950 billion | 6.8% |
| NVIDIA | $700 billion | 5.2% |
| Total | $10.9 Trillion | 75% |
75% of the market’s gains are from the 8 largest companies.
Nasdaq had to rebalance the Nasdaq 100-Index (NDX) because the concentration in big tech hit 60% in the top 7 names.
Regulators were literally worried about America’s index funds becoming so dominated by big tech.
The Nasdaq is now trading at 26X earnings, a 30% historically premium (20X historical P/E for 20 years).
The S&P is trading at “just” a 16% premium, assuming the bond market is wrong for the first time ever, and we avoid a recession.
But do you know what? It’s always and forever a market of stocks, not a stock market.
It’s raining blue-chip bargains from the sky! You just have to look.
When is it a good time to be buying stocks? Now, even as we are within spitting distance of new record highs.
Vanguard
70% of the time, it’s optimal to buy stock RIGHT NOW! 30% of the time, like right before a bear market, it’s not.
But guess what? I’m not telling you to buy the overvalued S&P 500 or the even more outrageously overvalued Nasdaq.
I’m telling you to buy the smart things, like the most undervalued dividend aristocrats!
Finding The Best Aristocrat Bargains
Here is how I used our Zen Research Terminal to find the 10 best aristocrat bargains for August, in 60 seconds. DK 500 Master List includes:
- 502 of the best blue-chips
- all dividend champions
- all dividend kings
- all dividend aristocrats
- all foreign aristocrats
- Ultra SWANs (wide moat aristocrats and future aristocrats)
- 40 of the world’s best growth stocks.
| Step | Screening Criteria | Companies Remaining |
| 1 | “Lists” and “dividend champions” | 134 |
| 2 | Non-Speculative (No Turnaround Stocks, investment grade) | 117 |
| 3 | BHS Rating “reasonable buy, good buy, strong buy, very strong buy, ultra value buy” | 58 |
| 4 |
Sort By Discount To Fair Value |
|
| 5 | Top 10 best aristocrat deals | 10 |
| Total Time | 1 minute |
What are the 10 best aristocrat bargains you can buy today?
The 10 Best Dividend Aristocrat Bargains For August
I’ve linked to articles providing more information about each company.
(Source: DK Research Terminal)
Fundamentals Summary
- yield: 3.7%
- safety: 88% (1.6% risk of a cut in severe recession)
- dividend growth streak: 36 years
- discount to fair value: 34% (Very strong buy)
- growth consensus: 8.0%
- Long-term total return potential: 11.6%
- 5-year valuation boost: 8.7% per year
- 5-year consensus total return potential: 3.7% yield + 8% growth + 8.7% valuation boost = 20.4% CAGR.
How would you like to potentially earn Buffett-like 20% returns for the next 5 years? While buying 10 of the most undervalued and most dependable dividend blue chips?
Consensus Total Return Potential
First of Long Island Corp 2025 Consensus Total Return Potential
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Albemarle 2025 Consensus Total Return Potential
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UMB Financial 2025 Consensus Total Return Potential
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ABM Industries 2025 Consensus Total Return Potential
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Chubb Limited 2025 Consensus Total Return Potential
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Natural Fuel Gas 2025 Consensus Total Return Potential
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Community Bank Systems 2025 Consensus Total Return Potential
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Community Trust Bancorp 2025 Consensus Total Return Potential
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Enterprise Products Partners 2025 Consensus Total Return Potential
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First Financial Corp 2025 Consensus Total Return Potential
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S&P 2025 Consensus Total Return Potential
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So let’s compare:
- S&P 15% upside through the end of 2025
- 6% annual return.
Now these 10 deep-value aristocrats:
- 50% upside
- 31% CAGR through 2025.
20% CAGR consensus total return potential over the next five years = 150% vs. 39% S&P 500
3X the total return potential of the S&P 500 due to superior valuation.
Historical Return Since 1998
Portfolio Visualizer Premium 
Portfolio Visualizer Premium
Analysts expect 11.6% long-term returns from these Aristocrats vs. an average 15-year rolling return of 11.7% and 10.3% annual returns for 25 years, including the current bear market.
Best Bull Market Off Bear Market Lows
| Time Frame (Years) | Annual Returns | Total Returns |
| 1 | 70% | 70% |
| 3 | 24% | 90% |
| 5 | 22% (20% current consensus) | 169% |
| 7 | 20% | 259% |
| 10 | 15% | 321% |
| 15 | 15% | 697% |
(Source: Portfolio Visualizer Premium.)
Bottom Line: It’s Never Too Late To Be A Stock Market Genius!
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The market is crazy, but that doesn’t mean you can be smart.
You can be a stock market genius, and all it takes is making non-idiotic long-term investments like
- First of Long Island Corp
- Albemarle
- UMB Financial
- ABM Industries
- Chubb Limited
- Natural Fuel Gas
- Community Bank Systems
- Community Trust Bancorp
- Enterprise Products Partners- K1 issuing MLP
- First Financial Corp.
Fundamentals Summary
- yield: 3.7%
- safety: 88% (1.6% risk of a cut in severe recession)
- dividend growth streak: 36 years
- discount to fair value: 34% (Very strong buy)
- growth consensus: 8.0%
- Long-term total return potential: 11.6%
- 5-year valuation boost: 8.7% per year
- 5-year consensus total return potential: 3.7% yield + 8% growth + 8.7% valuation boost = 20.4% CAGR.
Do you want a very safe yield of almost 4%? How about long-term return potential that’s 15% better than the S&P? How about a 36-year dividend growth streak and a 34% discount that creates the potential for a 150% upside over the next five years?
Buffett-like return potential from blue-chip bargains hiding in plain sight during a raging market bubble with stocks near all-time highs.
It’s always and forever a market of stocks, not a stock market.
It’s always your choice whether to pay over 70X earnings for a red-hot Wall Street darling or buy world-class companies at 7X earnings, the same valuation Marc Cuban gets on Shark Tank.
