Category: technology

Tech’s Four Horseman getting carried away

Bull markets typically die when speculators crowd into a narrow area, taking a small group of adored stocks on a parabolic joyride. The Teflon theme these days seems to be “global economic boom” (coupled with a weak dollar) and the clear winners are what Jim Cramer and his followers are calling the “Four Horsemen:” Google, Amazon.com, Apple, and Research in Motion.

The Nasdaq tape pre-market this morning was practically all GOOG, AMZN, AAPL, RIMM and GRMN (GPS co. Garmin). For the deep-pocketed corporate buyer, these companies can be had for $445.2 billion. That purchases $21.7 billion in annual gross profit (20.5x) and $3.55 billion in annual R&D spending (125.3x).

Or the acquisitive type might consider 5 larger, though still world-class companies with enviable competitive positions: Cisco Systems, Oracle, Qualcomm, Yahoo! and eBay. The price tag of $446.9 billion comes with $52.1 billion in gross profit (8.6x) and $10.1 billion in R&D (44.4x). Neither group is exactly cheap by historical standards, though the former is in nosebleed territory reminiscent of the valuations on tech companies during Tech Bubble 1.0 in the year 2000.

Bullish Consensus on Nasdaq 100 near optimistic extreme

On Friday, Market Vane’s gauge of futures advisers’ sentiment showed 72% bullish on the Nasdaq 100 (NDX). The 5 year range of this contrary indicator is 23% (on Feb. 7, 2003) to 77% (April 27, 2007).

This supports our belief that the global economic boom theme is alive and well, and that investors are hiding out in the stocks of large export-oriented technology companies.

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