Displaying items by tag: tech

(San Francisco)

The market has become very worried about tech valuations. Even with recent selloffs, tech stock prices are very rich. However, despite the broad fears, some fund managers are ditching the concerns, as they think the obsession with P/E ratios is short-sighted for tech. In particular, one manager says that he likes to think about how tech companies will look as mature businesses, and thus judging them by their current P/E ratios is unfair.

FINSUM: We agree that it is hard to assess tech stocks according to standard P/E ratios. They are growing much faster, have much higher margins, and have a brighter future than stocks in any other sector of their size. Accordingly, it is hard to contextualize their P/E ratios because there is no benchmark.

(New York)

One of the most famous hedge fund managers just made what seems a bold and countercyclical move. That manager is David Einhorn, and the move is to ditch all tech stocks and buy retail instead. In its most recent quarterly filings, Einhorn’s Greenlight Capital bought shares of Gap, Best Buy, Dollar General, TJX Companies, and Dollar Tree, all while significantly pairing holdings of Apple and Micron Technology.

FINSUM: Retail has had a good run over the last year, but the industry is still facing some major headwinds. We think buying retail now seems like a macro bet that the US economy will stay strong.

(New York)

The market finally had a down day yesterday (with the exception of the Nasdaq) after a good recovery. That said, many are worried about the market’s breadth, as most of the gains this year have come from just the six FAANG stocks. However, Barron’s notes that “just three sectors out of 11 are up more than the S&P 500 this year—that would be tech, discretionary, and health care—seven sectors have stronger breadth readings than the S&P 500, and all except energy have more than half their stocks trading above their 50-day moving average”.

FINSUM: Market breadth seems to have improved considerably over the last month, and generally speaking, the fundamentals underlying the market look healthier.

(New York)

Are you a growth investor or value investor? This has long been a bifurcating question, and has taken on increased importance in the last decade, as the former strategy has outperformed the latter by a wide margin. However, there are some occasions where a stock can be both. Using a simple screen, here are some companies priced like value stocks, but with the core expansion characteristics of growth companies. These include: Micron Technology, Energen Corp., Callon Petroleum, Cal-Maine Foods, Valero Energy, TimkenSteel Corp, and TRI Pointe Group.

FINSUM: Many of these might not be familiar names, but the selection is an interesting methodology and we think they are worth a look.

(San Francisco)

Tech stocks have been through a rough patch, FAANGs especially. Facebook has been absolutely obliterated, while Netflix has had some steep falls. But is there still a bull case for the FAANGs? Barron’s says yes. Given Apple’s great numbers recently, the FAANGs have a little bit of momentum back. The core of the argument is dead simple—FANG stocks (leaving out Apple) are still growing at 35x the rate of the broader market, so it is hard not to see them rising. The article argues that the group is a generational trade that captures the growth of the internet.

FINSUM: When you get right down to it, the business models of the FANGs (lets leave Apple aside for a moment because it is a very different business) are very solid. We think investors will come around to that sooner rather than later.