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A New Tech Bull Market?
The Nasdaq 100 is in an ostensible bull market. Maybe you heard.
I say "ostensible" not just because it seems a bit premature to suggest equities' troubles are over. There are also legitimate concerns about the durability of leadership, which is obviously quite lopsided.
A simple ratio of the equal-weighted big-tech gauge to its cap-weighted counterpart suggests that outside of the pandemic boom, when America's mega-cap tech titans reached their zenith, breadth has never been this poor.
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Perhaps a fourth reason is distribution before the market turns south once again?
I think the decline is rotating through different sectors. Tech took it on the chin through 2022, it is getting off the canvas now, likely (in my opinion) to be knocked down again in coming quarters. That said, I’ve been buying some cyclical semiconductor names – MU and a couple Europeans – where valuation looks decent-ish, and I bought some META AMZN and GOOG back last year when they started cutting heads, only one of which has been a good decision so far.
I appreciate your honesty about trades that haven’t worked out. When that happens, at least for FAAMG, do you just hold (so you don’t realize losses) or do you take the loss when you see something better?
‘At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?’— Scott McNealy (Sun Microsystems), Business Week, 2002
Look at recent mkt cap/ltm revenue of the current titans. The more things change …