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Valuation gap

It is difficult to talk about the US market valuation because there are at least two different markets: tech mega caps in bubble territory and the rest of the companies with a spectrum of different metrics in different valuation levels. When you compare US companies with other markets such as Japan, you can see the big gap in valuations and maybe understand why Warren Buffett has been buying Japanese stocks lately. Only 4% of US companies on the S&P500 have a ratio of Price to sales lower than 1 and and #roe between 10-20%. In Japan, 17% of the companies comply with those metrics. Furthermore, 15% of the companies of the S&P500 have a price to sales ratio of more than 10X. As we continue with the 2Q earnings season, we will see big swings in price due to these extreme metrics.


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