Some years in the stock market feel very mundane. Others do not – and 2026 is certainly one of them.
Despite geopolitical uncertainty and high oil prices, AI excitement has continued to give the stock market a buzz typified by last week’s historic Space Exploration Technologies public offering.
The FTSE 100 has already hit an all-time high this year, although it is below that level now. But buoyant markets and a less-than-buoyant economy going hand in hand rarely ends well, as we know from history.
So, as an investor, what am I doing?
Learning from experience
I am sticking to what I regard as time-tested stock market principles, rather than going along with narratives such as “this time is different” or “AI changes everything”.
AI may (or may not) change a lot – time will tell. But, as with the 2008 financial crisis, dotcom boom and countless earlier crashes, technological or financial innovation does not make the whole market different forever. Fundamental principles of finance and investing tend to reassert themselves over time.
I definitely reckon parts of the stock market look frothy right now. But I am not wasting time trying to time the market. After all, while history tells us there will be a stock market crash sooner or later, nobody can know for sure when that will be.
Instead, I am looking to the wisdom of billionaire investor Warren Buffett, who has lived through multiple stock market booms and crashes.
Sticking to longtstanding valuation principles
Buffett has said that, when people are greedy, it is time for investors to be fearful – and, conversely, when people are fearful, to be greedy.
With some AI-related valuations lately, I have definitely seen a lot of greed in the market.
So is it time to be fearful? In sectors where valuations look heavily stretched, I think so.
But elsewhere, I continue to spot what I think look like potential bargains, using traditional valuation metrics.
Such metrics may have fallen somewhat out of fashion lately (as they often do when the stock market gets very excited) – but I believe they are as relevant as ever.
This stock looks cheap to me
Take Campbell’s (NASDAQ: CPB) as an example.
The eponymous soup manufacturer currently trades for around 11 times earnings. Given its stable of well-known brands, proven business model and strong cash flows, that looks unreasonably cheap to me.
The number does not tell the full story, admittedly. Campbell’s net debt of $6.6bn looks uncomfortably high for a company with a $6.8bn market value.
Its processed foods are struggling to retain appeal in a marker where both health and budget have become more important to some consumers than before.
But I see these as short-term rather than permanent damages. I believe the proven business ought to be able to overcome them in the next several years. It is solidly profitable and offers a 6.8% yield.
I have been buying Campbell’s shares and plan to hold them for the long term.
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Christopher Ruane owns shares in Campbell’s.
