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:
- Clear and Present Danger: Unfunded Pension Liabilities
- Diversifying with Energy and Is It a Death Spiral or Sale in Tobacco?
- Real Returns in a World of Negative Rates & Are US Banks on Sale or Doomed?
- Risk and Reward in Large US Banks & Relative Value in Dividend Paying Stocks
