I confess that when I think about these values I always have a feeling like bipolar. On the one hand I think they have gone too far and too high, but on the other hand I think, this is not Tesla that has yet to prove everything and above all make money, these values earn fortunes, they are the best companies in the world.
And how do these two disparate things come together, one very good and the other very bad? Well, according to a brilliant new article by Mark Hulbert, an analyst that you already know, I always recommend continuing, wrong … It is not enough to go very well and earn a lot of money in these types of situations.
And this is clearly demonstrated by what happened to the Nifty Fifty bubble in the early 1970s. For those who do not know it, I am going to remind you of an article I wrote a long time ago.
See this quote, it was not a bubble about the usual, it was about values, very good and that they earned a lot:
It was a peculiar bubble. Most of the big global bubbles are on assets of suspicious value. For example the madness of the tulips. Or for example bitcoin.
Or, for example, biotechnology, with some strong values, but most of them very weak, without benefits of any kind. Or the dot-com bubble, where completely empty values, some even nonsensical, “were worth” more on the stock market than oil companies with a hundred years old and enormous infrastructures. Do you remember Astroc in another sector in Spain? There are many examples.
But the Nifty Fifty bubble was very rare. It was a bubble that focused exclusively on the 50 stocks that the market believed to be most valuable. Those who made money, those who had a real good future.
Well, you can read this analysis by Hulbert at this link:
See what happened to these Nifty values:
Although its income continued to grow at a rapid rate in subsequent years, its extreme overvaluation meant that its stock prices were still going nowhere or declining for years.
Another example that he cites, based on a work by V. Deluard
Another analogy is with Cisco Systems CSCO, -0.04% stock at the cusp of the internet bubble of the late 1990s, when it briefly became the world’s most valuable stock. Since then, the company’s sales have grown at more than twice the average rate of the S&P 500 company. And yet, despite this impressive growth, the company’s shares are now well below where they were then. .
And in this quote the key to everything is summarized:
It will be virtually impossible for some of the largest companies in the US stock market to grow fast enough to justify their current valuations.
That’s the conclusion drawn by a recent study by Vincent Deluard, head of global macro strategy at investment firm StoneX. His argument is not just that certain large-cap growth companies operate under the assumption that their revenues will grow at incredibly fast rates. He adds that even if a given company grows fast enough, it will soon be larger than the market as a whole. In that case, “valuations are mathematically impossible.”
In sum, all this work, which you can read more widely in the article, shows that even if they continue to earn a lot of money, which will be the most normal thing, these greats in the market are not guaranteed in light of mathematics and previous great experiences. revaluations like the past. Very important to take into account all this.
José Luis Cárpatos.
The post The brilliant results of Apple, Amazon, etc, do not guarantee clear increases in the future. first appeared on Serenity Markets.