r/valueinvesting
Unpopular opinion: buying companies with $1tn+ valuation is not value investing
Author argues trillion-dollar companies offer no edge for retail investors, suggesting true value lies in neglected small caps.
- True mispricing exists in neglected areas like spinoffs and small caps.
- Retail investors can find an edge in low-coverage situations.
- Trillion-dollar companies are heavily covered by analysts, leaving zero edge for retail.
- Buying megacap consensus contradicts the original notion of value investing.
Yes, a trillion-dollar company can trade below intrinsic value. Buffett bought AAPL around 10x earnings. Size doesn’t make something expensive.
But that’s not where our edge is. A $1tn company has 40 analysts, every fund modeling it, and a million retail eyes on each print. The odds you spot something they all missed are basically zero. Buying the megacap consensus isn’t the original notion of value investing.
Good businesses at fair prices is not where most of the value lives for small retail investors.
Mispricing lives in neglect. Spinoffs nobody’s repriced, $200m names with two analysts, foreign listings most US investors won’t open, NCAV situations. That’s where the work actually pays.
This community is one of the few places online where people still do that work. Discussions here are priceless. The one thing I wish I saw more of is small caps.
What’s your take?
For those of you who do hunt small caps: where do you find them, and what’s on your list?
Disagree. Check GOOG in the past 2 years
Made a lot of money off Google scare now I’m heavy meta
Disagree. No absolutes in investing. Need to look at valuation relative to earnings and growth rate. Companies over 1T can be a bargain just as companies under 1M can be expensive.
There are multiple reasons why a company can be undervalued.
more reasons that a random redditor will be unable to price the stock more accurately than the market. you can safely assume that these stocks trade at fair value, and that any percieved edge over the market is more likely just pure delusion than investment skill.
mispricing sometimes dont come from stocks that no one covers. everyone covered nvidia before 2023 blow out earnings and all the sellside got their estimates wrong.
I’d say you’re right. All companies with 100b plus market cap have to be efficient. Too many eyes on it.
But a company with 1 trillion making 100b profit per year would be a great deal imo. Even if never grows and keeps stable it’s 10% a year profit. I know you don’t get that directly from dividends but you get one way or another (dividends or cash in company aka appreciation of the company)
10 p/e looks cheap, but only if the profits are real and can keep showing up. otherwise it’s just bait.
you buy when they are disconnected, like meta rn
What the fk Are you saying? So Google and Microsoft are conglomerates with 20% revenue growth and their businesses is itself like combination of many many good businesses. You think it is mom and pop shop?
Guaranteed Buffett wouldn't be investing in these mega caps if he only had $1M to manage.
L take
Probably not, or they wouldn’t be asking for this sub’s take.
But that’s not where our edge is.
You think institutions have who people, whose life work has been to learn how to evaluate businesses, working full time to find businesses that are undervalued, don't have the time, knowledge, and discipline that we do to find sub-trillion value businesses?
It's easy to pick good value stocks. It's hard to pick good ones that are going to be successful long enough to outlast market noise/hype cycles.
A lot of people's successful "value stocks" are actually just stocks that were fairly valued that are now overvalued. Real value investing success happens when the stock is still discounted 10 years later, but the company's earnings have outpaced the market so much that it's new undervalued price still beats the market.
I partially agree but the framing needs nuance. "Value investing" isn't about the price tag — it's about the gap between price and intrinsic value.A $1T company trading at 15x forward earnings with 20% revenue growth and expanding margins can be cheaper than a $5B company trading at 8x earnings with declining revenue and structural headwinds.Look at META in early 2023: it was a $350B company that everyone called "dead money." Turned out to be one of the best value plays of the decade because the market was pricing in permanent margin compression that never materialized.The real issue with mega-caps isn't the valuation — it's the concentration risk and the assumption that terminal growth rates stay elevated. When you buy a $1T+ company, you're implicitly assuming:1) The moat holds for 10+ years2) Capex cycles pay off3) Regulatory risk stays manageableGet any of those wrong and you're holding a value trap at scale. But get them right and the compounding is real.I'd rather own a reasonably priced $1T company with a clear moat than a "cheap" small-cap with no competitive advantage.