Why this billionaire investor thinks tech stocks are still cheap

Why this billionaire investor thinks tech stocks are still cheap

If you’re looking for a dose of optimism, then head to the recent interview on CNBC with billionaire hedge fund pioneer, Julian Robertson. Robertson says he’s still bullish on this market, and he’s particularly keen on leading tech stocks like Facebook, Google and Microsoft.

On 14 June, Robertson told CNBC: “I think we are at least six months [from a slowdown] and hopefully two years…I hope [the Fed] won’t be too frightened when their own policies start to work…I don’t think the FANGS or the tech stocks are frothy at all. I think relative to the rest of the market, never have stocks been this cheap. This is one advantage an old goat has.”

“[Microsoft, Google and Facebook] …probably sell on average under a 25 per cent premium to the market…that’s not terribly high for the greatest companies in the world…you have to look at them in relation to their growth”.

Here are the trailing and forward PEs for Google, Microsoft and Facebook (as at 26 June 2018) as discussed.

Source: Nasdaq.com

Interestingly, and perhaps belying his trading background, Robertson owns Twitter (trailing PE 764x, forward PE 131x), but later he says he doesn’t know it.

It is important investors think about value – as we always do. While we all here believe that the market is expensive and valuations for some stocks are extremely stretched, there are opportunities. Figure 1 perhaps best summarises the current situation.

Figure 1.  Value still exists

Source: Montgomery Global Investment Management

The bulk of companies are generally slightly overpriced and of course there is a tail of companies that are extremely overpriced. But there is also a tail of companies whose market prices represent good value.

It seems Robertson concurs.

Robertson’s background makes interesting reading, you can find it here.

Watch Robertson’s interview on CNBC here.

The Montgomery Global Funds own shares in Facebook, Google and Microsoft. This article was prepared 26 June 2018 with the information we have today, and our view may change. It does not constitute formal advice or professional investment advice. If you wish to trade Facebook, Google or Microsoft you should seek financial advice.

Billionaire hedge fund pioneer, Julian Robertson says he’s still bullish on this market, and he’s particularly keen on leading tech stocks like Facebook, Google and Microsoft. Click To Tweet

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Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.