Key insights
- The author argues that the current semiconductor-driven S&P 500 gains are not a bubble but reflect genuine revenue growth in cyclical stocks. Despite significant price increases in companies like Micron and NVDA, their PE ratios have decreased, suggesting reasonable valuations. The author implies a bullish outlook, aligning with value investing principles of buying "wonderful companies at fair prices."
Normally we simply skip bubbles. But this current bull run is based on real fundamental growths. Semiconductors are cyclical stocks.
Micron's price for example rose by over 100% in the recent months, but their revenue has increased by 50%. NVDA rose 44% in one year while their revenue has increased 71%. The list goes on...
This is not a bubble. These are CYCLICALS. Look at the car and energy boom in the 20s and 70s. Same pattern. Revenue, PE and stock price rise following a decrease in PE at the peak. Afterwards a correction happened.
Weirdly enough their PE ratio has dropped to 25-35 range.
-> 'Wonderful companies at fair prices'
(Warren Buffet)
Isn't that what value investors supposed to buy?