Legendary investor Jeremy Grantham, who has successfully crashed the past two market crashes, has repeatedly warned in recent years that the US stock market is in the midst of the biggest bubble in history and that an even bigger crash is coming, hence the nickname "bubble prophet".
However, that doesn't stop his company from buying tech stocks, some of which he warned about being overhyped.
His company, GMO, has five of the so-called "Big Seven" in its largest common portfolio, which drove the bulk of this year's total.
Of his $8 billion GMO Quality Mutual Fund, only two of the Big Seven** are excluded: Nvidia and Tesla.
Five others — Microsoft, Apple, Alphabet, Amazon and Meta (which were known as FaAMG before Facebook changed its name to Meta) — helped the company make a 25 percent gain this year, outpacing the S&P 500's nearly 19 percent gain.
Tom Hancock, GMO's co-manager of quality, said in an interview: "It's interesting that companies like Microsoft and Apple, you would think they're going to be super crowded, but I don't think so. Actually, we caught them. Clearly, we think the valuation is reasonable. ”
However, he thinks Nvidia is too expensive. Due to the company's growing importance in the development of artificial intelligence, its stock price has soared by more than 225% this year. Some analysts have questioned whether there is room for the company to grow further, and challenges continue to emerge as new competition intensifies.
Hancock also said that Tesla does not have a head start over its competitors. Its dominance in the EV space is beginning to be tested, with its share of the EV industry in the U.S. currently at an all-time low of 50%.
But Hancock said in an interview in November that there is still room for the rest of the tech stocks and is not overvalued in the long run.
Hancock said companies that offer high returns on capital are justified in paying higher premiums, not to look for undervalued bargains, but to steer clear of over-inflated assets.
"We're focused on valuation and quality of business," he said. We're not looking for cigar butts, we're trying to avoid over-hype. ”
This article is sourced from: the financial world.