One giant reason why tech bubble talk may simply be overblown
Wednesday, Aug 02, 2017 07:02 by InvestingPie

So much for dull Apple results.

The Cupertino, Calif. company cooled fevered brows over iPhone sales, to the relief of many investor faithful.

But to be sure, fear has been riding shotgun alongside the postelection rally, with specific worries aimed at the strength of big techs like Facebook FB, -0.19%  , Amazon AMZN, -0.03%  , Netflix NFLX, -0.87%   and Alphabet’s Google GOOGL, -0.52%  . They’re too dominant, too expensive — Netflix’s forward price/earnings ratio stands at 155.4 times — and look bubbly, complain some.

But our call of the day, from Jefferies‘s Sean Darby, takes another swat at that bubble talk.

He doesn’t see the tech sector as overvalued, even if broader markets are hitting new highs. On most conventional measures, the tech majors aren’t even expensive, the Jefferies chief global equity strategist tells clients in a note Wednesday.

He explains: “In our view, many of the constituents have either joined an oligopoly (semiconductors) or have achieved monopolistic models that allow for ‘increasing returns to scale’ (internet/media).”

The semiconductor industry, for example, has been concentrated into a smaller group of players, far different from what was going on in the late 1990s, says Darby. That and an improving economic recovery means they should be getting higher returns.

He thinks the chart shows odds are in favor of “good things” happening over the next five to 20 years. “Therefore, under our approach, we will continue to give the long-term trends the benefit of the doubt, as long as they remain in place,” says Ciovacco.

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Very informative
05-03 04:23 by Liam
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