02/20/2020

The Relative Price of an Apple and The Value Factor

The Relative Price of an Apple

We don’t like to call the top in any market, though we do note that relative valuations in a few places are starting to look extreme. The collective market capitalization of Apple, Microsoft, Amazon, Facebook and Alphabet now exceeds $3.0 trillion dollars. For a bit more perspective on these astronomy-like numbers we can make a few intriguing observations. Apple and Microsoft now have, together, a capitalization greater than the entire Russell 2000. We suspect the latter might represent a more prudent and certainly diversified bet. Looking just at Apple alone, one could choose between owning this company or the entire energy sector. Previously we suggested taking a closer look at energy companies with sustainable cash flows and we continue to suggest this perspective.

Value Factor

Recent years have seen an increasing affinity for the use of investment factors in explaining performance. Interestingly, this year both the momentum and the low volatility factors, along with value, are all close in their returns for the year.

Notable Factors in 2019

Source: Yahoo

Some market observers believe recent moves suggest a period of relative outperformance for the value factor is now on the horizon. After years of poor returns, those betting against the value factor might wish to be cautious.

Source: Verdad Capital

 


To review previous market perspectives, click the following links:

About Paul Blinn 17 Articles

Managing Director of Toreador Research and Trading

About Paul Blinn 17 Articles

Managing Director of Toreador Research and Trading