Ep 48: Why Big Tech Stocks Must Underperform

The five biggest tech stocks -- Amazon, Apple, Facebook, Google, and Microsoft -- are great businesses. They've been so successful over the last decade that they comprise about 20% of the total S&P 500 market capitalization -- a level of concentration not seen since the late 1990s. They also command higher prices (valuation) than the market as a whole.

While these companies have provided outsized growth rates and returns to investors over the last decade, there is no logical reason you should expect similar outsized growth rates and returns over the coming decade. Whether it is due to the magnitude of their success, capitalism or regulation, it will be nearly impossible to repeat their growth and success moving forward.

Listen to Kevin describe a simple thought experiment illustrating why it's mathematically impossible for past to be prologue for these tech darlings. Eventually, the music will run out. Investors will again learn the lesson that price matters ... just as they learned the same at the end of the Tech Bubble.

 

Timestamps:

6:24 - Why Do Tech Stocks Get So Much Attention?

9:46 - Looking Back At Tech Stock Growth From 2010-2019

14:57 - Why Growth Will Be Much More Difficult Going Forward

25:00 - Why Prices Matter