August 2022
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August 15, 2022

Financials Matter

"It's Not Just About Finance"

Unlike the Tech Wreck of 2000…

 

It’s time to tighten your seatbelts as this overcrowded, tired, and running out of gas market gets ready for the next induced CovidCrash.

A lot has been said about the narrowness in the market and the performance bias of the big five from the S&P 500 – Apple and Microsoft (Tech Sector), Facebook and Google (Communication Services), and Amazon (Consumer Discretionary) – which are up nearly +29%.

Unfortunately, the remaining 495 stocks, are down -3.4%.

Ironically (or NOT) the Big Five represent a much larger weight in the S&P 500 today than at the market peak in 2000.

Back then, the largest five stocks were Microsoft, Cisco, General Electric, Intel and Exxon Mobil.  They represented 18% of the S&P 500 on a cap-weighted basis vs. today’s Big Five at more than 24% at the recent peak.

Translation:  The current bludgeoning in the market is Unlike the Tech Wreck of 2000.

Case in point.  Even though the valuations are high, the forward P/E of the Big Five stocks today are more “reasonable” at 33 compared to their average multiple of 60 in 2000.

That doesn’t mean they’re cheap.

But it’s worth noting that the big five are often lumped together as “tech” stocks.

The truth is they actually span three distinct S&P sectors – Tech, Communication Services, and Consumer Discretionary (see above).

To put this in perspective, look at what’s been happening in the economy in 2020, The Year of Chaos.

This is not an endorsement of the big five stocks; but think about how much time you spend each day buying or using the services of these companies.

Without a doubt this has certainly been amplified during the fake-pandemic era.

Unfortunately, the next CovidCrash (Cough! Lockdowns, Cough!) will deceive most investors as the boyz in the “Club” try to get you to Zig while they Zag.

It’s how they make money at your expense.

Don’t take the bait.

Outside of the Big Five, there are plenty of stocks out there that are undervalued for the patient investor.

See which one’s appeal to you (HERE).

 

 

 

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