On Friday, after being tortured enough by Big A, I and an A-share investor suffered another hammer in the evening.
Meta's Q4 earnings report came up with expectations that beat Wall Street's earnings guidance and paid a dividend of 5 cents per share on top of a $50 billion buyback.
50 billion US dollars, 350 billion yuan, you must know that the total repurchase amount of A-share listed companies last year spent a total of 86.8 billion yuan, which is just a fraction of Meta, and the gap can be seen.
This move shocked Wall Street, and of course it also made us on this side of the ocean a lot of energy.
Buying back when it rises, buying back when it falls, making money and paying dividends, how can this stock price not rise?
Envy, that's for sure.
If you push back the time to 2022, Meta is still trapped in the metaverse, and its stock price plummeted by 64% in 2022, which is actually not much better than our core assets.
But from 2023 to now, Meta's stock price has tripled.
Behind the explosion of the stock price is that Meta seized the opportunity of AIGC, with the open-source Llama series of models, played a solid turnaround, and the fine-tuned AI model on its basis claimed to have surpassed GPT-3.5, and even approached GPT-4.
To put it bluntly, only fundamentals are the most solid support for stock price growth.
The core problem is that it is easy to speculate on valuations, and it is difficult to maintain fundamentals.
This is something that A-shares have been playing out again and again, and it is also the source of my envy and fear of heights when I look at U.S. stocks.
If you have suffered the loss of high valuation, it is difficult to convince yourself to chase the rise.
The PE of S&P 500 constituents is still somewhat high
Last week, the yield on the 10-year Treasury note fell sharply, stopping at around 4%, compared to 5% before that.
We know that the 10-year Treasury bond is the anchor for equity investment pricing.
The yield of 5% on 10-year U.S. bonds means that you can get a return of 5% every year for holding a risk-free 10-year U.S. bond, and if nothing remains the same, it can be recouped in 20 years, so the PE of a 10-year U.S. bond is 20 times.
This shows that the risk and volatility are greater than that of 10-year treasury bonds, and the reasonable valuation should not be higher than 20-25 times, otherwise it is okay to buy treasury bonds.
But as of now, 282 stocks in the S&P 500 are valued above 20 times, and 213 of them are valued above 25 times, while the valuation of the US Seven Fairies and the S&P 500 compared to A-shares is about the same.
We can say that micro-corporate earnings from a strong U.S. economy can absorb this valuation.
We can also say that the market system of U.S. stocks paying large dividends, buying back, and emphasizing investment over financing can support the stock index to continue to reach new highs and upward in the long-term cycle, which I recognize and 120% envy.
But when the U.S. Treasury yield is already so high, it always feels a little strange that the valuation of so many companies is still so high, which is also a point that Duan Yongping was a little confused about a few days ago.
Note that I'm not bearish on U.S. stocks, which is a very risky thing.
I'm just, expressing a concern.
The bull market in the US stock market in recent years is actually a bull market for the Nasdaq and the S&P, and the bull market for the index is actually a bull market brought about by the heavyweights of the Big Seven in the US stocks.
In addition to the strong performance of these companies in the interest rate hike cycle, the other constituent stocks of the S&P 500 are actually a little lackluster in terms of fundamentals and stock price growth, and the revenue of the S&P 493 is basically unchanged, and the net profit growth rate is still falling.
The so-called interest rate hike on the operation of American companies is not without impact, but is borne by the S&P 493 and other smaller companies, and the rise of the entire index is completed by the S&P 7.
Where has the bull market of the few gone?
This index bull dominated by a handful of tech companies is more extreme than any other huddle in the history of the US stock market, and has long since gone far beyond the bull market of the Nifty 50s of the 70s and the tech bubble of 2000.
The only difference is that economic globalization and the Internet have given these technology companies the ability to make money all over the world, which is a money-making model that no traditional company has, and other companies in other countries are far from it.
In other words, if we regard the first industrial revolution and the second industrial revolution as the colonization of the rest of the world by the developed capitalist countries using their technological superiority, then what is the difference between what the Big Seven are now doing is using the powerful resource monopoly in search engines, social media, chips, and Internet retail brought by the Internet and technological colonization?
Because the Big Seven are the core assets of the entire planet, they have also attracted global funds.
Therefore, although the overall performance is better than other companies, the volatility and risks brought by it are also greater.
As the macro guru Zulov mentioned at the end of last year, 62% of the world's funds go into the US stock market tracking the S&P or Nasdaq, and 30% of the money flows into the shares of these seven companies, which means that the risk is extremely high, and the market is prone to volatility if something disappointing happens.
Since 2024, the Big Seven have contributed 45% of the S&P 500's return in January, and the group's market capitalization now stands at $12.5 trillion, surpassing the GDP of major cities like New York and Tokyo.
To put it bluntly, the goal of our investment is "antifragile", but the bull market brought about by the boom of seven stocks is actually quite "fragile" in nature, right?
Now, even the Big Seven are no longer monolithic, and the Big Seven have a vague tendency to shrink to the Big Four...
The ones that performed well were Nvidia, Amazon, Microsoft, and Meta, while the average ones were Apple and Google, and as for Tesla, there was a lot of pressure.
Microsoft has now surpassed Apple to be the largest brother in terms of market capitalization, but the growth rate of the cloud business is less than expected, and Google's Q4 advertising business is less than expected.
Apple's first quarterly revenue growth in a year is positive, but sales in China are down 13%, and iPhone sales are likely to remain weak.
Needless to say, Tesla's gross profit has shrunk, and it has also given a somewhat sluggish 2024 performance guidance, and there is already an opinion to fire Tesla from the Big Seven.
The gradual emergence of hidden concerns about the revenue of core companies is actually a signal worth paying attention to.
You should still remember that the core assets of A-shares collapsed one after another, first the consumer stocks represented by liquor collapsed, and then the pharmaceutical stocks also began to fall sharply, and finally even the most prosperous new energy could not be carried out, and the general trend of the local bull market finally reversed.
Previous history has proven time and time again that good companies should fall and they must fall.
U.S. stocks have not seen major changes in a century
The overall high-interest rate environment and the valuation of the leading U.S. company with high PE eventually caused Buffett's Berkshire Hathaway cash reserves to climb steadily——
The Q4 earnings report has not yet been released, at least in Q3, Berkshire's cash and cash equivalents in hand reached a record high of $157.2 billion.
Sometimes I think that Warren Buffett's endurance to endure loneliness and wait for the hitting area is worth learning from.
On February 24, Berkshire announced its fourth-quarter earnings and annual report, and Buffett will also issue a letter to shareholders at that time, and look at and cherish it.
To a certain extent, the U.S. stock market is also in another "great change unseen in a century", but we can't feel it in history.
Of course, when it comes to this, there must be friends who say, "Will it be good if the U.S. stock market falls and A-shares?"
You're right, the fundamentals of these core companies in the U.S. stock market are definitely incomparable to other companies in the world, but because we have suffered losses and have seen the potential risks brought by the huddle, it is more reasonable to buy some relatively undervalued U.S. stocks and even Russell 2000 at this moment?
In the final analysis, it is the capital that affects the short-term performance of the stock price, and if the few companies in the global capital group A-shares, can it also bring huge gains?
What can you choose if you have a lot of money to hold A shares?
The central enterprise giants represented by ICBC and CNOOC?
Or are they over-the-top growth stocks represented by Moutai, Tencent, and Ningwang?