Are stocks overvalued? Comparing the top 20 US companies today vs. 20 years ago

There is constant chatter about how overvalued equity markets are.

Now, I don’t disagree that stock markets around the world are at rich valuations. I think it would be a bit of a crazy statement to say the market is screamingly cheap we’re closer to screamingly expensive than cheap.

The market is NOT cheap. Agreed. And particularly not cheap for US securities. It’s rich for anyone’s blood.

So all of that is fine…

I hear:
“Returns are going to be bad from here because earnings yields… every time historically you get to these points in the market you have a decade of poor returns for equity markets.” This type of logic.

To start, stock market predictions have a horrendously bad track record.

But that's not the problem with these claims. It’s the blanket statements implying p/e multiple of S&P stocks is elevated historically = stocks will do bad. This is ignoring so much data.

Stock markets, stock indices like the TSX60, S&P 500, Russell 2000, Nasdaq 100 are indices that track a basket of companies. The Nasdaq 100 doesn’t just magically go one direction or the other based on vibes or who is going to win an election. Maybe in the short term, but in the longer run they move on the performance of the underlying businesses inside them. Just like the performance of a portfolio of 10 stocks would.

So what are the good indicators of if stocks go up or down long term? Revenue growth and operating margins. Morgan Stanley's research on return decomposition from Michael Mauboussin is fantastic.

To summarize my take on the research… revenue growth and operating margins are things directly affected by decisions the company makes and generally a result of the business model, management skill and the market they are in.

Here are the top 20 companies by market cap in 2005:

Source: The American Business History Center

These are the companies that ruled America. Here are the top 20 today. Small interesting note is the companies remain in both lists are Microsoft, Exxon, Walmart, Berkshire and JP Morgan.

Source: FinChat

These are the companies that rule the world.

I have 28 stocks on my close watchlist.

These are names I watch closely, but don’t have a position. This is a list generally of companies I would be happy to be a shareholder in. But for one reason or another, they are not yet positions.

Here they are alphabetically and one KPI I track for each. Airbnb $ABNB

Total nights & experiences booked is my favourite metric to track.

Gross bookings is helpful, but this metric can tell me a lot that the growth of traffic and longer term stays story is in tact.

I own 20 stocks.

They all have KPIs that move the needle for their business. They provide signal in a world of noise.

Here is the list and just one important KPI that I track for each one: 1. Autodesk $ADSK

Autodesk provides 3D design, engineering, and entertainment software and services worldwide.

Autodesk Subscriptions count gives me an idea how the business is growing customer base and recurring revenue.

Introducing FinChat.io - The Chat GPT for Finance.

FinChat is a generative AI tool that will provide you with information on 750+ companies and 100+ super investors.

It is your powerful equity analyst assistant.

Here is how it can supercharge your finance career. Unlike traditional ChatGPT, FinChat.io is trained on:

📊 Up to date financial data
🎙️ Earnings call transcripts
📆 Quarterly + annual reports
🏦 13Fs
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🎯Granular business KPIs
with sources!

Yesterday I asked everyone to submit their votes for their Top 5 Wide Moat businesses.

I compiled the results, here they are.

Many names you would come to expect, but also some interesting smaller caps and private companies as well. 👇 The businesses that received more than 10 votes.

$GOOG $MSFT $V $MA $ASML $COST $AAPL $AMZN $SPGI $MCO $TSM $CP

For the first time, I just sent out my quarterly update to early investors in @stratosphere_io.

In the spirit of #buildinpublic I have decided to post it here as well. 1/COMMENTARY
The first half of the year has been both exciting and experimental in our pursuit of product market fit.

Public and private markets have been difficult to navigate as they both affect our business right now, but we remain optimistic and continue to grow our product.

Costco $COST have had relentless focus and obsession with providing an incredible value proposition for their members.

Short Saturday morning coffee thread ☕️ 👇 Today, Costco is just over 800 warehouses (stores) with over 80% of locations in North America.

The business has tremendous opportunity for international expansion, continued same store sales growth and widening their competitive advantages.

1/ New deep dive on Crowdstrike is up on the site!
Well over 12 pages of notes and figures.

Crowdstrike: Securing The Lead

stratosphereinvesting.com/company-report…

$CRWD 2/ $CRWD is a leading provider of AI-driven, cloud-native threat intelligence, response, computing device protection, and several other cybersecurity services for small to large enterprises.

Hey Twit👋

Stratosphere is a research platform for self-directed investors.

The platform has:
1) Powerful software to conduct research on stocks.
2) Our own in-house research team providing easy-to-read reports on high quality businesses.

This thread will compile our reports👇 The reports are primers on great businesses in easy to digest formats.

We aim to simply explain:

1) How the business and industry works.
2) How they make money.
3) The company's history.
3) What makes them great.
4) The future of growth.
5) Risks & competition.

Here is my working A-Z list of the greatest businesses on the planet 🌎

Abbott $ABT
Accenture $ACN
Activision Blizzard $ATVI
Adobe $ADBE
Airbnb $ABNB
Alibaba $BABA
Alphabet $GOOG
Amazon $AMZN
American Tower $AMT
Ansys $ANSS
Apple $AAPL
Atlassian $TEAM
Autodesk $ADSK Blackrock $BLK
Boeing $BA
Brookfield AM $BAM $BAM.TO
BRP $DOOO $DOO.TO
Byteance (Private)
Canva (Private)
Charter $CHTR
CN Rail $CNI $CNR.TO
Constellation Software $CSU.TO
Costco $COST
Dassault Systems $DASTF
Descartes $DSGX $DSG.TO
Disney $DIS
Dominos $DPZ
Elastic $ESTC

1/ Enghouse: The Crystal Ball Acquirer is up on the site now.
$ENGH.TO

👇👇👇

stratosphereinvesting.com/enghouse-engh-… Enghouse first went public in 1998. Stephen Sadler joined in 2000 and has remained at the helm since.

The stock went nowhere for a decade.