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Why the Nasdaq Is Nowhere Near a Bubble

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At the risk of sounding cliché, bubble worries are bubbling up all over the place these days.

Not only has a string of record-high closes fueled the talk, but meteoric moves by a handful of hot stocks have drawn many observers to conclude that the end is near for a bull market that will turn five years old this March.

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Wall Street veteran Jeff Saut disagrees.  The chief investment strategist at Raymond James Financial has seen his share of bubbles over a long illustrious career and says, contrary to all the hype, the label just doesn't fit this time, especially for the Nasdaq (^IXIC) which today blasted through 4,000 for the first time in 13 years.

“I don’t think you’re in a bubble,” Saut says in the attached video.  “The equity markets care only if things are getting better or getting worse” he adds, “and I think things, especially in technology, are getting better.”

To that point, this Florida-based market watcher says unlike the so-called “dot-com bubble” of 1999, where unknown and unprofitable companies were getting bid-up for things such as “eyeball counts,” this market is much more reasonable in term of valuations and real metrics.

“If you look at it, relative to the other nine macro sectors, technology is fairly cheap,” he says, noting that, save for a handful of super hot winners, the majority of tech names, particularly big old players like IBM (IBM), are still cheap.
 
“Surely there are some individual companies that are really richly multipled,” he says, “but when you look at it as a group, in terms of price-to-sales, P/E ratios, there’s tons of cash on the balance sheets, and they’ll benefit from a pick-up in Europe.”

For the record, Saut is personally on guard for the next two weeks, yet remains a long-term bull and believer in the market’s future upside.  With that in mind, he suggests investors take advantage of the seasonal phenomenon known as tax loss selling, and pick up some lagging tech names on the cheap “that are down around their lows and worth looking at.”

So while the Bubble-watch is sure to continue, Saut is one investor who is more concerned with the big picture than he is with the hype of the headlines.

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