The title of this article comes from a recent discussion I had with a client of mine. First, we should define what “the fundamental” means. It is best defined in Intelligent Investor, a book by Warren Buffet’s teacher Benjamin Graham. In short, his idea of a good investment is a stock with good earnings selling at a cheap price. 

Graham’s insights were lately confirmed by Eugene Fama’s Nobel Prize-winning research, where Fama found that throughout history (until maybe 2015,) small-cap value stocks performed the best.

At present, the stock market in the US is definitely not following Ben Graham’s fundamentals. 70% of all returns are concentrated in the seven biggest tech stocks, all of which are very expensive. Nvidia for example, has a $3T valuation, which is 4 times the GDP of Taiwan, where its AI chips are made. 

Returning to the fundamental means stocks like NVDA must l deflate and small-cap value stocks will outperform again. I have informed myself about this subject through the latest research of Robert Shiller and Eugene Fama, both Nobel Prize winners. However, before I air my opinion, I’d like to hear yours. Please reply to this newsletter sharing what you think. Thanks!

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