Current Market Conditions And Big Tech

Hey, The Investor’s Podcast Network Community!

The biggest tech stocks including Google, Facebook, Amazon, Apple, and several others have nosedived recently. It’s tempting to make a comparison to the “Nifty Fifty” which consisted of 50 popular large-cap stocks back in the 1960s and the 1970s that were perceived as solid buy-and-hold stocks almost regardless of fundamentals.

While many tech stocks today look significantly overvalued, I don’t think Google, Facebook, and Apple are in that category. However, it would also be a stretch to call them undervalued. What has changed since the “Nifty Fifty” is that many tech companies today are built around network effects that enable growth rates not previously possible given the size of the company.

Google Maps, for example, improved because of the information, comments, and problem reports acquired through users of the app over several years. And because the app has improved, more people use it. The same principle is true for most services of Google. This is why you see a company with a market cap of more than $700B and $120B in sales continue to grow 20% year over year.

Though technology has changed the growth prospects for some companies, what hasn’t changed is sound fundamentals. We’re not looking at a stock market with many appealing valuations. It seems like the best thing you can hope for is what Warren Buffett calls “wonderful companies at fair prices.” But “wonderful companies at wonderful prices” are hard to find, and it has been so for quite some time.

Together with Preston, I outlined how I position myself in today’s market in our recent episode. One of the things I elaborate on in the podcast is the concept of “opportunity cost” and why I aim to be mostly invested in the market, as it is currently the least bad alternative I can find within my circle of competences.

If you want to learn more about the process of how Preston and I value individual stocks, you can check out our free Intrinsic Value Index or our latest intrinsic value assessments attached in this email.

I hope you have a wonderful rest of the week.

Your Friends,