“The stocks in my portfolio are precious gems, immune to any problems in the system”. Yes, I know it’s a fallacy.

So, please, help me sort it out. I have been dragged into the raging debate on stock valuations. I have to confess, I feel out of my league on this issue, when engaging with such thorough experts as @Jesse_Livermore (, a moderate bull, or @jessefelder (, a moderate bear.

When I write about interest rates or currency, I possess (or at least project) much authority and experience. But I know relatively little about corporate valuations. My inclination to stay long equities over the last few years has been a function of my observing historical patterns and trends and my long-term portfolio strategy, but had little to do with whether I thought the overall market was still cheap.

So let me share my confusion. Reading various pieces on the overall US stock market valuations, I find the analysis ranging from fair to very expensive. Yet when I look at individual companies I know, so many of them still look like a bargain.

What DO I know? I mostly follow banks, tech, and social media. I know nothing of consumer, retail, utilities, biotech and so on.

Let’s start with banks. (I source P/Es from Yahoo! Finance).

$JPM  11.24;  $WFC 13.29;   $GS 10.97

Those guys seem to be priced for various degrees of bankageddon. Indeed, they don’t need any growth to justify their valuations, all they have to do is not to have all their earnings taken away by fines.

Established tech.

$IBM 13.49; $INTC 13.02

What is going out style? Computers or computer chips specifically?

All of the above enjoy a healthy growth of EPS via buyback and cheap funding. Some scoff at buybacks, but to me buying your own shares, when they are cheap, and locking the funding seems like a great investment.

Now let’s move to the growth sector.

$AAPL 16.82;  $GOOGL 26.85; $FB 74.65; $TWTR N/A

Are those the culprits of overvaluation?

$AAPL is certainly not as dirt cheap as it was a couple of years ago (similar to $INTC), but still doesn’t look stretched at all, given the power of their brand and continuing revenue growth.

In fact, all four companies above have virtually indestructible brands. There monetization is at different levels of maturity. But it’s hard to imagine any of them to be a terrible long-term gamble.

So where does the overvaluation lie? Is it all the biotech’s fault?


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