p/e 84?

Now the RUT rally has exceeded even my expectations for how quickly it could get back to 1180. I'm sure there is a fair amount of "bear hunting" going on, but some of my favorite small caps are acting great for good reasons and I want to buy more. In fact, I did buy one today.

But, here's the number that still bothers the bears the most about the RUT: 84.

That's the 12-month trailing P/E for the index.  [wsj has it at 83.  they have the Nasdaq at 22, the S&P 500 at 19, the Dow at 16.  I thought the average was more like 16?  Well let's look at the VFINX.  Morningstar has it at 16.67.]

That is worrisome. But here's another number the bears should focus on: 19.

That's the 12-month forward P/E.

Now, of course, I'm not saying that I believe the RUT will fulfill those wonderful forward estimates. But that's not the point.

The point is that many large investors are piling fresh cash into many small companies that they believe will move from a triple-digit P/E to a double-digit one, or that they believe will be doubling or tripling their sales in the next year.

-- Kevin Cook

[not that p/e 19 is all that low -- and the market is apparently a bit more expensive than I thought]