Buffett's Modified Market Indicator Tops 150%

The top stocks by market cap remain significantly overvalued

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James Li
May 03, 2021
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On Monday, Berkshire Hathaway Inc. (

BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio)'s modified market indicator surpassed 150% on the back of several major "Big Tech" companies remaining significantly overvalued based on the GF Value Line, including Apple Inc. (AAPL, Financial) and Microsoft Corp. (MSFT, Financial).

Dow starts new month with a bang as investors bet on economic recovery

The Dow Jones Industrial Average closed at 34,113.23, up 238.38 points from last Friday's close of 33,874.85.

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Stocks surged on the heels of New York Governor Andrew Cuomo and Florida Governor Ron DeSantis announcing plans to lift coronavirus mandates across their states. New York, New Jersey and Connecticut will begin lifting capacity restrictions starting May 19 while Florida will suspend all Covid-19 emergency orders and related public health restrictions.

Stock market remains significantly overvalued

Buffett observed that the ratio of total market cap to gross domestic product is probably the best measures "of where valuations stand at any given moment." GuruFocus modified the ratio by adding the total assets of the Federal Reserve Bank to the denominator.

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"Big Tech" stocks like Apple and Microsoft remain significantly overvalued based on the GF Value Line. GuruFocus' exclusive valuation method branches from Peter Lynch's earnings line concept and considers the following factors: historical multiples, internal adjustments for past performance and estimates for future growth.

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Disclosure: Long Apple.

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I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!