Forget Nvidia. Costco and Walmart Look Scarier
Shares are surging because investors think that they can’t go down, and that’s a dangerous assumption.
The safety record of zeppelins was relatively unimpeachable prior to the Hindenburg. In markets too, the most painful selloffs tend to involve things that people erroneously assume to be absolutely secure.
While valuation Cassandras tend to focus on the pricy multiples of artificial intelligence stocks, Walmart and Costco actually trade at richer blended forward price-earnings ratios (47 times and 34.3 times, respectively) than Nvidia Corp. (34 times)
In slightly oversimplified terms, investors are willing to pay more per dollar of next year’s earnings than they’re willing to pay for a supposedly risk-free two-year Treasury note with government-guaranteed coupons.
These stocks are surging because investors believe that they can’t go down! And paradoxically, that now puts them at a heightened risk of correction.
A return to those previous 10-year average multiples would imply a 39% drop for Walmart and a 28% decline for Costco, holding current 12-month earnings expectations constant.
Jonathan Levin Bloomberg August 27, 2025
https://en.wikipedia.org/wiki/Costco
https://en.wikipedia.org/wiki/Walmart
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