Best of the Week
Most Popular
1.Are UK Savings Interest Rates Finally Starting to Rise? Best Cash ISA 2017 - Nadeem_Walayat
2.Inflation Tsunami - Supermarkets, Retail Sector Crisis 2017, EU Suicide and Burning Stocks - Nadeem_Walayat
3.Big Moves in the World Stock Markets - Big Bases - Rambus_Chartology
4.The Next Financial Implosion Is Not Going To Be About The Banks! - Gordon_T_Long
5.Why EU BrExit Single Market Access Hard line is European Union Committing Suicide - Nadeem_Walayat
6.Trump Ramps Up US Military Debt Spending In Preparations for China War - Nadeem_Walayat
7.Watch What Happens When Silver Price Hits $26...  - MoneyMetals
8.Stock Market Fake Risk, Fake Return? Market Crash? - 2nd Mar 17 - Axel_Merk
9.Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral? - Nadeem_Walayat
10.Why Gold Will Boom In 2017 - James Burgess
Last 7 days
SNP Independent Scotland's Destiny With Economic Catastrophe, the English Subsidy - IndyRef2 - 24th Mar 17
Stock Market VIX Cycles Set To Explode March/April 2017 – Part II - 23rd Mar 17
Is Now a Good Time to Invest in the US Housing Market? - 23rd Mar 17
The Stock Market Is a Present-Day Version of Pavlov’s Dog - 23rd Mar 17
US Budget - There’s Almost Nothing Left To Cut - 23rd Mar 17
Stock Market Upward Reversal Or Just Quick Rebound Before Another Leg Down? - 23rd Mar 17
Trends to Look Out For as a Modern-day Landlord - 23rd Mar 17
Here’s Why Interstate Health Insurance Won’t Fix Obamacare / Trumpcare - 23rd Mar 17
China’s Biggest Limitations Determine the Future of East Asia - 23rd Mar 17
This is About So Much More Than Trump and Brexit - 23rd Mar 17
Trump Stock Market Rally Over? 20% Bear Drop By Mid Summer? - 22nd Mar 17
Trump Added $3 Trillion in Wealth to Stock Market Participants - 22nd Mar 17
What's Next for the US Dollar, Gold and Stocks? - 22nd Mar 17
MSM Bond Market Full Nonsense Mode as ‘Trump Trades’ Unwind on Schedule - 22nd Mar 17
Peak Gold – Biggest Gold Story Not Being Reported - 22nd Mar 17
Return of Sovereign France, Europe’s Changing Landscape - 22nd Mar 17
Trump Stocks Bull Market Rolling Over? You Were Warned! - 22nd Mar 17
Stock Market Charts That Scream “This Is It” - Here’s What to Do - 22nd Mar 17
Raising the Minimum Wage Is a Jobs Killing Move - 22nd Mar 17
Potential Bottoming Patterns in Gold and Silver Precious Metals Stocks Complex... - 22nd Mar 17
UK Stagflation, Soaring Inflation CPI 2.3%, RPI 3.2%, Real 4.4% - 21st Mar 17
The Demise of the Gold and Silver Bull Run is Greatly Exaggerated - 21st Mar 17
USD Decline Continues, Pull SPX Down as well? - 21st Mar 17
Trump Watershed Budget - 21st Mar 17
How do Client Acquisition Offers Affect Businesses? - 21st Mar 17
Physical Metals Demand Plus Manipulation Suits Will Break Paper Market - 20th Mar 17
Stock Market Uncertainty Following Interest Rate Increase - Will Uptrend Continue? - 20th Mar 17
Precious Metals : Who’s in Charge ? - 20th Mar 17
Stock Market Correction Continues - 20th Mar 17
Why The Status Quo Is Under Increasing Attack By 'Populist People Power' - 20th Mar 17
Why the SNP WILL Destroy Scotland, Exit UK Single Market for EU - IndyRef2 - 19th Mar 17
Crypto Craziness: Bitcoin Plunges on Fork Concerns, Steem Skyrockets and Dash Surges Above $100 - 19th Mar 17
What ‘Ice-Nine’ Means for Your Money - 19th Mar 17
Stock Market 4 Year Cycle - 18th Mar 17
The Only Article You Need to Read to Understand the Trump Phenomenon - 17th Mar 17
Janet Yellen Just Popped the Stock Market Bubble - 17th Mar 17
Financial Crisis, Steve Eisman: Smart, Lucky, Abrasive & Now One Of Them - 17th Mar 17
Gold Cup – Horse Racing’s Greatest Show, Gambling and ‘Going for Gold’ - 17th Mar 17
Trader Education Week - Free Event to Help You Learn to Spot Trading Opportunities - 17th Mar 17
$1.4 Trillion of SPX Notionals Due to Expire - 17th Mar 17
Preserving Order Amid Change in NAFTA, U.S. Sovereignty v. WTO - 17th Mar 17
3 Maps That Explain Why Syria Raqqa Battle Will Drag On - 17th Mar 17
Crude Oil Price Outlook 2017 - Video - 16th Mar 17
Dutch and French Electons - Winners are Losers and Left is Right - 16th Mar 17
The Straddle Trade Stock Market Brief - 16th Mar 17
Gold Up 1.8%, Silver Up 2.6% After Dovish Fed Signals Slow Interest Rate Rises - 16th Mar 17
Stocks Get Close To Record High Again As Fed Hikes Interest Rates - 16th Mar 17
Scotland Second Independence Referendum War - SNP Determined to Destroy the UK - 16th Mar 17
Here’s How Pharma Is Using AI Deep Learning To Cure Aging - 16th Mar 17
Stock Market Chaos in the Chicken Coop - 15th Mar 17
Gold and Silver Price Manipulation: The Biggest Financial Crime In History - 15th Mar 17
“Ryancare” Dead on Arrival: Can We Please Now Try Single Payer? - 15th Mar 17
Fanaticism, Stock Market Crash 2017 or Continuation of Bull Market - 15th Mar 17
Stock Market Most Overvalued On Record — Worse Than 1929? - 15th Mar 17
Desperate Saudi Arabia Turns to Asia for Investment - 15th Mar 17
Startups Will Define the Future of US Employment - 15th Mar 17
Fed Rate Hikes, Fiscal vs. Monetary Policy and Why Again the Case for Gold? - 15th Mar 17
SNP Declare Scotland to Commit Economic Suicide Early 2019, 2nd Independence Referendum - 14th Mar 17

Market Oracle FREE Newsletter

Elliott Wave Trading

Stock Market Nifty-Fifty Becomes Fab-Five; Return of the 'Four Horseman'

Stock-Markets / Stock Markets 2015 Nov 20, 2015 - 01:09 PM GMT

By: Mike_Shedlock

Stock-Markets

Anyone recall the logic in the 1960s and 1970s that suggested there were only 50 stocks one needed to look at, and those 50 stocks could never go wrong?

That theory was labeled the "Nifty-Fifty ".

Nonetheless, the long bear market of the 1970s that lasted until 1982 caused valuations of the nifty fifty to fall to low levels along with the rest of the market, with most of the Nifty-Fifty under-performing the broader market averages.


The "Nifty-Fifty" of the 1960s gave way to the "Four Horseman" of the tech era: Microsoft, Dell, Cisco and Intel.

Microsoft

Microsoft Monthly Chart

Microsoft opened the year 2000 at $41.19.
It is now $53.85.
Congratulations, you are ahead, but it did take 14 years. Counting dividends, you are now well ahead.

Dell

Historically Dell last traded at $13.73 on 10/29/2013. It opened the year 2000 at $50.40. You are seriously underwater and will never catch up. Dell is now private.

Intel

Intel Monthly Chart

Intel opened the year 2000 at $29.65. It is now $33.16.
Congratulations, you went ahead in 2014.
Does it feel like it?

Cicso

Cisco Monthly Chart

Cisco opened the year 2000 at $47.43. It is now $27.12.
You are seriously underwater still.

If you bought the hype-of-the-day "Four Horseman" in 2000 and held on, you are still underwater fifteen years later.

Recall that EMC, Oracle, Sun Microsystems, and Juniper Networks were all regarded as must own for the long haul "gorillas".

New Four Horseman

On January 6 2012, GeekWire proclaimed Meet the new 'four horsemen' of tech: Sorry, Microsoft, Dell, Cisco and Intel .

Oh, how the technology landscape has changed. Ten years ago, the industry was dominated by names such as Microsoft, Intel, Dell and Cisco.

Fast forward to 2012, and the makeup looks quite different. CNN recently surveyed 30 technology experts and thousands of readers to come up with what it dubbed the Four Horsemen of tech.

Respondents were asked to choose only from publicly-traded companies, so Facebook didn't make an appearance.

Apple easily was the top vote getter, followed by Google, Amazon.com and - an oldie, but a goodie - IBM.

IBM, Apple and Amazon certainly could qualify as comeback stories, while Google has yet to really be tested in terms of its market dominance in Internet search. (Possibly signaling a fall).

Nonetheless, what's fascinating is how Microsoft no longer makes the cut. (In reader polling, IBM edged out Microsoft with 67 percent of the vote). Microsoft is still a juggernaut, but as CNN's editors point out "the PC is no longer driving technology growth."

The New Four Horsemen of Tech

Final Four, Elite Eight, Sweet Sixteen

Amazon, Google, Apple, and IBM were billed as the new four horsemen in 2012.

Oracle, Salesforce, Microsoft, and Cisco were in the "elite eight" with Qualcomm, Verizon, VMware, Samsung, Nuance, eBay, ARM, and Dell rounding out the "sweet sixteen".

Really? Yes, really.

Giddy Up!

In July of 2015, CNN Money proclaimed Why you need to own the Four Horsemen of Tech .

Move aside IBM, you were replaced by Facebook as a "need to own".

Fab-Five

On November 16, Yahoo Finance reported How A Monster Year For Amazon, Google And Facebook Is Carrying The Stock Market .

There are 500 companies* in the S&P 500, but 2015 has been a year for the top 1%. Five companies -- Amazon.com, Alphabet/Google, Microsoft, Facebook and General Electric -- have collective returns that account for more than the entire return of the index year-to-date, according to a note from Goldman Sachs.

Excluding the aforementioned quintet, the S&P 500 would be down 2.2% this year, instead of being virtually flat, up 0.1%. Goldman's chief U.S. equity strategist and the firm's portfolio strategy research team note that narrow market breadth, with just a handful of strong performers carrying the load for a slew of weaker performers, tends to favor high-quality stocks with strong balance sheets and lower volatility.

Netflix also warrants mention, as the S&P 500's top performer for the year. But even with its stock up 120% in 2015, Netflix is far smaller than the companies above and its $46 billion market cap dims its influence on the cap-weighted S&P.

Notably absent from the list is Apple, which has returned just 3.7% in 2015, and Wal-Mart, down 33% and suffering through its worst year in stock performance terms since 1973.

Fab-Five Drive S&P

Fab Five are Driving The S&P500 in 2015

Warnings Signs

Breadth is a huge warning sign. That fewer and fewer stocks participate in rallies is synonymous with topping action.

Netflix Key Stats

Check out the Netflix Key Stats .

  • Trailing PE: 319
  • Forward PE: 462
  • Market Cap: $51.53 billion
  • Book Value: $5.07 per share
  • Share Price: $120
  • Price/Book: 23.09

Amazon Key Stats

  • Trailing PE: 950.63
  • Forward PE: 117.65
  • Market Cap: $311.04 billion
  • Book Value: $26.50 per share
  • Share Price: $663.54
  • Price/Book: 24.27

Facebook Key Stats

  • Trailing PE: 108.20
  • Forward PE: 37.68
  • Market Cap: $304.77 billion
  • Book Value: $14.72 per share
  • Share Price: $107.77
  • Price/Book: 7.14

Hey, no problems there!

After all, Facebook and Amazon are "need to own" stocks according to CNN Money.

Ozone Layer

Momentum players ignored the PE warts, thereby pushing the market higher and higher so that it's now well into the ozone layer .

GMO Forecast

In contrast to mainstream media "must own" analysis, GMO just came out with its Seven Year Forecast .

GMO 7-Year Asset Class Real Returns

GMO's Disclaimer

"The chart represents real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward-looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward-looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forwardlooking statements. U.S. inflation is assumed to mean revert to long-term inflation of 2.2% over 15 years."

Real Returns

GMO depicts "real" inflation adjusted returns. If one assumes 2% inflation and the forecast hold true, then seven years from now, the stock market will be where it is today.

But the stock market will not be flat for seven years. It is far more likely to look like this.

S&P 500 17-Year Chart

Greater Fools Game

I actually believe GMO is overly optimistic.

Only those playing the greater fools game (whether they realize it or not) are investing in stocks at these prices.

Nifty-Fifty Becomes Fab-Five

A friend of mine pinged me with this comment in regards to the "Fab Five":

I think this is another one of those instances where the extreme nature of the topping process (and the market advance has thinned out to an incredible extent) probably hints at the significance of the top being formed. The only other time a topping process took this long was during the last stage of the tech bubble.

If the future rhymes with the handful of previous cycles we have to guide us, the "real" stock prices we see today may not be seen again for another 20-30 years.

Valuations Matter

There is never a point in which a handful of stocks or even a basket of 50 stocks are "must own" and you can put them away and forget about them. Valuations must be taken into consideration along with changing times and changing technology.

Yet, here we go again, with the same theories telling people they can do precisely that. Today's version of the "Nifty-Fifty" is now called the "Fab-Five".

And another set of "Four Horsemen" are galloping again .... for now.

By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Click Here To Scroll Thru My Recent Post List

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management . Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.

Visit Sitka Pacific's Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

I do weekly podcasts every Thursday on HoweStreet and a brief 7 minute segment on Saturday on CKNW AM 980 in Vancouver.

When not writing about stocks or the economy I spends a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com .

© 2015 Mike Shedlock, All Rights Reserved.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Mike Shedlock Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife