The 'Canadian Warren Buffett' Warns Tech Stocks Are More Overvalued Than During The Dotcom Bubble And Predicts A Painful Selloff
- Growth stocks are more overvalued today than they were during the dotcom boom, warns Prem Vatsa.
- Warren Buffett Canada said that tech stocks appear to be vastly undervalued relative to the stock's value.
- The billionaire investor and head of Fairfax Financial has warned that growth stocks may be in decline.
The billionaire investor dubbed "Canada's Warren Buffett" has warned that tech stocks are more unreasonably overvalued than they were during the dot-com bubble and predicted they will fall sharply.
"The valuation of value stocks versus growth stocks, especially technology stocks, has never been more extreme than it was in the 2000s," said Prem Vatsa. "As the economy continues to normalize, we anticipate a return to mid-value oriented stocks."
Watsa is the founder and CEO of Fairfax Financial, an insurance conglomerate with a multibillion-dollar stock portfolio often compared to Buffett's Berkshire Hathaway. According to a transcript provided by Sentieo/AlphaSense, it issued a gloomy outlook for US equities on Friday during its fourth-quarter earnings call.
The value investor said by phone that his company's stock was still deeply undervalued, but he expected that to change. He noted that Fairfax's portfolio doubled in value between 2000 and 2002, while major US stock indexes nearly halved during that time.
Value investors are also noting that despite the market rally this year, Big Tech stocks like Amazon and Tesla are still below their 2021 peaks. Plus, smaller peers like Zoom and Shopify are still climbing to edge.
"If history is any guide, there's a lot more to come," Watsa said. "I'm going to show that the Nasdaq went down 50 percent in 2000 and then went down another 50 percent over the next 2 years."
Fairfax and Berkshire share several major stakes, including Bank of America, Chevron and Occidental Petroleum. Watsa also shares Buffett's love of highly concentrated betting; seven stocks, including Blackberry, made up nearly 90% of Fairfax's $4 billion portfolio at the end of December.
To know more. We asked top economist David Rosenberg 7 questions. Here's what he had to say about stocks and home prices and the threat of recession.
