How Expensive Is the Stock Market?
The answer may shock you.
One of the best quotes about valuation I’ve ever seen came from Sun Microsystems’ CEO after the dot-com crash.
At 10x revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. Zero costs. Zero R&D. Zero taxes. Zero employees.
What were you thinking?
How much of the S&P 500 is trading for this crazy valuation today?
The answer may shock you. I’ll get to that in a moment.
Weekly Update
The market reversed course late last week as much of the AI/semiconductor trade dropped to valuations not seen since a week ago. We’ll see if the drop continues this week.
The Asymmetric Portfolio dropped on Friday after holding up well earlier in the week and is still clinging to a slight edge over the market long-term.
I’m comfortable with where my stocks sit, though, in part because of valuation, which I’ll cover below.
In Case You Missed It
What I’m Buying: June 2026: Here’s a look at what I bought this month.
MGM’s Buyout Offer: MGM got a buyout offer from its largest shareholder, but I’m skeptical that a deal will get done.
Stock Buys AMA: I answered your questions about my buys this month.
Google Goes All-In: After raising another $85 billion, Google is all-in on winning AI.
Hims & Hers & Why 50% Growth Is On the Horizon: Hims & Hers’ growth is slowing, but not for long.
Stock Valuations
This post from Thierry was what had me digging into valuations today. It’s true that we’ve normalized 10x price-to-sales multiples, but as long-term investors, we shouldn’t because it’s extremely difficult to live up to that valuation.
He went on to post these stats. This is what the dot-com crash looked like.
Cisco: ~25x sales, P/E above 200. Crashed -90%. Finally broke its 2000 peak in December 2025. 25 years and 8 months later.
Intel: ~13x sales. Crashed -82%. Finally broke its 2000 peak in May 2026. Almost exactly 26 years later.
Microsoft: ~25x sales. Crashed -65%. Took 16 years and 8 months to make a new high (October 2016).
Qualcomm: ~30x sales. Crashed -88%. Took roughly 20 years to break even.
Sun Microsystems: ~10x sales. Crashed -97%. Acquired by Oracle in 2009.
JDSU: ~50x sales. Crashed -99%. Broken into pieces.
Yahoo: ~50x sales. Crashed -97%. Sold to Verizon for a fraction.
Lucent: ~10x sales. Crashed -99%. Eventually absorbed by Nokia.
Nortel: ~15x sales. Bankrupt in 2009.
These weren’t some $&#t-cos, these were the key infrastructure behind the dot-com buildout. Some of the equipment they made is still in use today!
Now, look at the companies trading over a 10x price-to-sales multiple today. Recognize any of them?
7 companies with a valuation over $1 trillion are over 10x P/S, and that doesn’t include SpaceX, which will IPO as early as this week.
Keep going down the list, and more stocks in memory, brokerages, and software are trading at crazy valuations.
So, why hasn’t the Asymmetric Portfolio kept up with these hot stocks this year?
I’m not riding this explosion in valuations. While over 50% of the S&P 500 has a P/S multiple over 10x, only 2 of 24 stocks in the Asymmetric Portfolio (Alphabet and Joby) trade for that multiple.
16 of 24 stocks trade for a P/S multiple under 5x. And in aggregate, the stocks I own are growing faster than the S&P 500.
I want multiple expansion to be a tailwind, not a headwind.
Long-term, I think that will be the right strategy, but it’s why I’m underperforming the market since October 2025.
We’ll see if I’m right or not. 10x sales is a high bar to beat, even for the best infrastructure stocks of the day.
Disclaimer: Asymmetric Investing provides analysis and research but DOES NOT provide individual financial advice. Travis Hoium may have a position in some of the stocks mentioned. All content is for informational purposes only. Asymmetric Investing is not a registered investment, legal, or tax advisor, or a broker/dealer. Trading any asset involves risk and could result in significant capital losses. Please, do your own research before acquiring stocks.
