The Market Is So Bifurcated At The Top End

During their latest episode of the VALUE: After Hours Podcast, Carlisle, Taylor, and Bloomstran discussed The Market Is So Bifurcated At The Top End. Here’s an excerpt from the episode:

Chris: I think even beyond the Mag 7, the market is so bifurcated at the top end of maybe 40 or 50 or 60 companies. Even Costco, which we still own in some of our older accounts, which we’ve owned since 2004, we paid $29 for it. It’s going to earn that in a couple of three years. But it traded at a $350 billion cap on $250 billion in revenues and a 2.7% margin. It was trading at 50 times earnings, a week and a half ago. And lo and behold, with the four letters in the ticker, back in the old days, really back in the old days, your three letter tickers were all New York Stock exchange companies. NASDAQ. Costco has always been a NASDAQ company. And it’s in the NASDAQ 100.

And so, I don’t think anybody in the right mind would buy Costco at 50 times earnings. The company doesn’t buy shares back with the exception of maybe diluting a little bit of what they do give away to shareholders. But 50 times is ridiculous. It’s a great business. They’ll continue to open stores at the cadence of 20 or 25 a year. But you can’t pay 50 times for a business that’s going to grow way less for the next 20 years, and it’s grown for the last 20 years. And so, it’s not just the 7, but there are still– [crosstalk]

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