(Bloomberg) — Carson Block, known for finding overvalued companies to bet against, said most investors now would be better off simply buying the biggest U.S. stocks as steady inflows continue to push the market higher .
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While there are concerns about valuation after the S&P 500 Index repeatedly hit new records this year, the founder of Muddy Waters Capital LLC said inflows from pension funds will remain a key driver of further gains, especially for the most heavily weighted names.
“It’s probably worth not thinking too much, just closing your eyes and probably buying Magnificent Seven,” Block said in an interview with Bloomberg TV, referring to the grouping of mega-cap stocks. “Over the last few years, I’ve looked back on my career as an activist short seller and done the math, and I felt like I probably could have been in the S&P 500 for just as long,” he added.
Block’s comments come amid renewed optimism among investors toward the cohort of the biggest tech names — Tesla Inc., Apple Inc., Microsoft Corp., Alphabet Inc., Amazon.com Inc., Nvidia Corp. and Meta Platforms Inc. – after a lackluster quarter when the Federal Reserve’s rate cut triggered a rotation to other sectors. The S&P 500 just posted a sixth straight week of gains thanks to a slew of solid corporate earnings, and these are signs that the world’s largest economy is holding up.
Meanwhile, Block reiterated his distaste for China, a market he calls “uninvestable.” He has been a longtime Chinese skeptic and one of the most famous short sellers when it comes to the Asian country’s stocks. He has instead preferred investing in Vietnam, where Muddy Waters has launched a long-only fund.
Despite a recent rally fueled by Beijing’s stimulus, Block says corporate governance issues, policy “fickleness” and geopolitical issues remain major hurdles.
“From a medium to long-term perspective, I still don’t see how it makes sense to spend money on China,” Block said, adding that he has no opinion on China in the short term.
“Ultimately, unlike Vietnam, which we are very constructive about, China does not feel that it really needs foreign capital. And I don’t think the intention is to accommodate foreign capital in the long term,” he said.
–With help from Naman Tandon.
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