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.