Coverage of the stock market has been dominated by Nvidia Corp. this week, as another eye-popping set of numbers has made the case that we are still in an early phase of the infrastructure rollout to support artificial intelligence technology.
But something else has been happening, as explained by Isabel Wang in the ETF Wrap newsletter, with record inflows of new money into a different pocket of the stock market.
Nvidia’s results and the reaction
Therese Poletti looked beyond sales growth to focus on Nvidia’s improving profit margins.
Steve Goldstein shared a chart that paints Nvidia in contrast to the other members of the “Magnificent Seven” group of companies: Microsoft Corp.
MSFT,
Apple Inc.
AAPL,
Amazon.com Inc.
AMZN,
Meta Platforms Inc.
META,
Alphabet Inc.
GOOGL,
and Tesla Inc.
TSLA,
More reaction to Nvidia:
Stock-market warnings
A period of exuberance, with the S&P 500
SPX
and Dow Jones Industrial Average
DJIA
hitting record highs on Thursday, leads to inevitable warnings.
Some of the warnings are based on what is perceived to be a high valuation for the market as a whole. The forward price-to-earnings ratio for the S&P 500, based on Thursday’s closing prices and weighted earnings-per-share estimates for the next 12 months among analysts polled by FactSet, was 20.2, up from 17.9 a year earlier.
Here are long-term average forward P/E ratios for the index:
| Forward P/E | 3-year average P/E | 5-year average P/E | 10-year average P/E | 15-year average P/E | 20-year average P/E |
| 20.24 | 19.23 | 19.35 | 17.97 | 16.28 | 15.83 |
| Source: FactSet | |||||
Here’s how the S&P 500’s current forward P/E compares to the long-term averages:
| Current P/E to 3-year avg. | Current P/E to 5-year avg. | Current P/E to 10-year av. | Current P/E to 15-year avg. | Current P/E to 20-year avg. |
| 105% | 105% | 113% | 124% | 128% |
| Source: FactSet | ||||
And now for the warnings:
Nvidia makes the case for looking beyond P/E ratios
An aversion to high P/E ratios might cause investors to miss out on extraordinary growth.
Wedbush analyst Dan Ives wrote in a note to clients on Thursday that “investors that have missed the biggest transformational tech stocks the last decade, including Amazon, Netflix, Meta, Apple, Alphabet among many others, have dogmatically stuck with the forward P/E valuation approach on these unique tech stories.”
He wrote that for “transformational tech stories,” including Nvidia and the other companies involved with the AI build-out, “investors must see the forest through the trees to where this spending wave (and estimates) can head over the next 3 years.”
Nvidia’s forward P/E ratio was 31.6 early Friday, reflecting rising estimates for the company’s profit over the next year, as well as this week’s price increase. The stock’s forward P/E was 52.6 a year ago. Meanwhile, the share price has risen 232%.
Back to the moon — there is money to be made
For the first time since 1972, a U.S. spacecraft landed on the moon on Thursday. Shares of Intuitive Machines Inc.
LUNR,
which built the Odysseus lander, were up 24% for one week through Thursday. The stock was up another 17% Friday morning.
James Rogers covered the Odysseus landing, and before that had an email exchange with Apollo 17 astronaut Harrison Schmitt, who walked on the moon in 1972 with Gene Cernan, the mission commander. Here’s what Schmitt had to say about the moon’s potential for investment and development.
Advice from the Moneyist
This week Quentin Fottrell — the Moneyist — helped a woman whose parents have died, but whose sister seems not to be motivated to settle their estate.
More from the Moneyist: I have $1.5 million in stocks and bonds. I asked my broker to convert my bonds to cash. He didn’t and my portfolio fell by $100,000. Can I sue?
Two years since Russia invaded Ukraine
When Russia began its invasion of Ukraine on Feb. 24, 2022, some expected a quick surrender. But the battle continues. Sanctions against Russia by the U.S. and other governments have helped to cause a contraction of the invader’s economy.
Hundreds of Western companies have also taken action against Russia, as James Rogers reported.
How one active fund manager keeps things simple and beats the market
Michael Brush interviewed Ryan Kelley, who co-manages the Hennessy Cornerstone Mid Cap 30 Fund HIMDX, which has been an outstanding performer and has a five-star rating (the highest rating) from Morningstar.
Kelley outlines five investing lessons — one of them is to be optimistic.
Passive vs. active investing: Has it become easier to beat index funds?
Thoughts on retirement and planning for it
Beth Pinsker interviewed Jacques Torres, who is now 65 and talks about his business’s changing fortunes and plans for retirement at his chocolate factory in Brooklyn.
Mark Hulbert has been inundated with material from brokerage firms and money managers with results of retirement-readiness surveys. Here’s what he thinks of the surveys and what might be a better approach for people and their financial advisers to take when thinking of retirement.
In the Help Me Retire column, Alessandra Malito helped a woman in her early 30s to decide whether or not to raid her tax-deferred retirement account to pay for tuition as she heads back to college.
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