Lee Munson sees tech bubble

Portfolio Prosperity Advisors president and CIO Lee Munson thinks tech shares are overvalued and that the marketplace is in a phase akin to 1999 before the 2000 Dotcom bubble.

“I do imagine we’re in a tech bubble,” Munson informed Jen Rogers on the Ultimate Round. “I believe we’re over and above 1998 now. … kind of in the 1999 stage, where nobody’s going to bet in opposition to FAANG stocks.”

FAANG shares refer to the five significant American tech stocks: Fb (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX) and Alphabet (formerly Google, GOOG). Munson asserted that investors had been getting quite complacent in what has grow to be an unsustainably frothy surroundings.

“The issue is that just simply because you can recognize the bubble does not indicate it is not heading to go increased,” Munson reported. “The issue is, wherever are all those valuations likely to appear down, and how significantly injury is likely to be finished likely forward? Simply because again, when you start out seeking at it, if Amazon stays on this class, it’s heading to be more substantial than the East India Investing Business.”

The FAANG shares. (Photograph: Seeking Alpha)

The asset manager’s comments occur on the back again of BofA Merrill Lynch’s July Fund Supervisor Study, where buyers recognized the lengthy FAANG+BAT as the most crowded trade for the sixth straight thirty day period. (BAT refers to the Chinese tech giants: Baidu (BIDU), Alibaba (BABA), and Tencent.)

Using a glance at Amazon and Netflix, two shares that Munson called overpriced, both are buying and selling drastically greater than the S&P500 market place index.

Amazon, Facebook and S&P500 calendar year-to-day charts, as of 10am on 18 July 2018. Netflix and Amazon are the two investing significantly bigger than the index.

Amazon & Netflix

Amazon’s stock is at present buying and selling at 231.89 occasions earnings (or P/E ratio).

The company, which just completed its annual Key Day and is contacting it the greatest 1 at any time, is constantly wanting for new marketplaces to disrupt.

It’s practically like an infinite sector to disrupt,” Munson claimed. “With Facebook, they have a single market place that they disrupted, which is ad product sales. Google had one particular current market they are disrupting, which is advertisement sales.” Amazon is “basically is just likely and destroying funds.”

Noteworthy Amazon acquisitions.

Netflix also has a significant P/E ratio, at 251.38.

“If you like overpriced stocks, I assume this is the a person to go,” stated Munson. “I suggest, in the final calendar year, they’ve burned via pretty much $2 billion. And so when analysts start out speaking about their destructive income circulation, it’s not my kind of stock. But I would be much extra interested in the inventory if it was down 12% and stayed down for some motive.”

For context, the S&P500 is trading at 24.34 occasions earnings.

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Lee Munson sees tech bubble