Published on: 01/25/2022
In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss the rise of the tech titans and how they affect the market.
Welcome to another edition of Chart Talk. I’m Tony Ogorek and I am here with our Portfolio Manager Jeff Viksjo. Today, Jeff, we’re going to be talking about the rise, the age, of the tech titans. So, let’s take a look at our first chart. Really interesting. We’ve got two columns of corporations. One is like a little column, and then we’ve got a massive column next to it. And what you see is, really, the change in what the market values just over the past 15-years. So, give us a little bit of background on what we’re seeing here.
So, the largest firms in 2005, you can see at the top of the list, was General Electric. Tony, they just announced a plan to break themselves up into three companies. They’ve actually lost value over the last 15-16 years, that’s on this chart. You can see other companies, we’ve got oil companies, we’ve got Wal-Mart, Johnson & Johnson, and a bank in Citi Group. You don’t see a lot of tech. Microsoft’s the only one on the list. You look to today, Tony, they’re all technology companies. They’re all the blue. You have your FAANG stocks, that we know, NVIDIA, and even Tesla is on there. Just incredible growth in the size of these firms that dwarfs anything that we saw in 2005.
And the interesting thing Jeff, is what’s driving these companies, for the most part except Tesla, is earnings. These corporations are making earnings. They are disrupting what’s going on in the world and that’s why the market values them as much as they do.
Now, let’s flip over to our second chart. And this one, really, is sort of an anomaly because you see all these companies, but then you see Tesla. And this is, really, what people are paying for a dollar of earnings and what do you see here Jeff?
Yeah, these firms really are defying the law of large numbers. They continue to grow very rapidly with the exception of, like you said, Tesla and even to Amazon to an extent. They make a ton of money and that’s why they’re worth almost $2 Trillion. But Tesla doesn’t make very much money. You can see, it’s trading at 350 times earnings. Tony, we tried to back into this valuation. It almost seems as if the market is projecting every car will be an electric vehicle very soon, and for every electric vehicle to be a Tesla.
And Jeff I just have to go back, I’m just like a few years older than you, but in 2000 the biggest company in terms of market cap, was Cisco. And from the market crash back then until now, which is 20 years hence, that stock has finally gotten back to a breaking point. So, it does matter, not just the company or the store you’re buying into, but the price you’re buying into it also.
Hopefully you’ve enjoyed this edition of Chart Talk. We look forward to seeing you at our next talk.
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