It's interesting that magazines are wondering about the death of small caps. We'll see if academic research holds, but even I've recently wondered about it.
Regarding investment flows into large caps, from a portfolio management perspective that I am being groomed towards, it appears that it's only one of the more acceptable ways of covering one's back in the investment community.
"Nobody ever gets fired for buying IBM."
We've all heard that line, and unfortunately, the opposite would appear to hold true as well. That is, if you end up a loser in a small cap stock, then you've got some serious explaining to do to your client, who just saw RNWK and YHOO just go up over 40 points in a day.
We'll see. But the manifestation of this two-tier market looks interestingly similar to the 1970's, when the Nifty Fifties were at their peak, and mid and small caps lagged seriously.
Take a look at some of the P/E multiples these companies traded at. They're very similar to today's market, except with the names changed to reflect the technological advances in today's society:
Stock....'72 P/E...'80 P/E
---------------------------
Sony........92........17
Polaroid....90........16
McDonald's..83.........9
Disney......76........11
H-P.........65........18
Think CSCO, LU, MSFT, DELL, YHOO and the inter'nuts.'
The small caps will get through this stealth bear market, but just like this large cap bull market, nobody knows just exactly when things are going to change.
RT |
