TECHNOLOGY - ARE WE IN BUBBLE TERRITORY?

OBSERVATIONS | JULY 2017

Over the past few years, investors have crowded into technology-related investments under the guise of many investment philosophies—scarce revenue growth, business disruptors, defensive earnings, oligopolistic market structures, as well as low volatility. Current valuations now make the investment decision from a valuation perspective much more difficult.


This year alone, demand for technology stocks has seen Facebook, Apple, Amazon, Microsoft and Google add USD 600 billion to their market cap…more than the combined GDPs of Hong Kong and South Africa.

Current valuations make the investment decision from a valuation perspective much more difficult—and as the Dot Com bubble proved, great businesses purchased at the wrong price are bad investments.

In this article, we look at technology mega-caps in the US (as opposed to a broader definition of information technology), and put their earnings into context to evaluate whether we feel current valuations are justified.