Displaying items by tag: faamg

(New York)

Large cap value is a very interesting area at the moment. Over the last few weeks there has been a pickup in breadth, with gainers outpacing losers 2-to-1. Megacap tech stocks are not leading the market like they were early on in the recovery. That means the chances for broad market gains are looking stronger. With that in mind, large cap value looks like an excellent choice. Compared to small and midcaps, large caps are less volatile and more diversified. They do have more international exposure (which could be a positive or a negative), but on the whole they appear as though they have as much or more upside potential with less downside risk.

FINSUM: If you believe in a coming broad-based rally in stocks, then large cap value seems like a good place to be.

(New York)

One of the most worrying characteristics of the extremely sharp recovery the market experienced over the summer was the heavy bias towards the highest end of large caps-mega caps. Facebook, Apple, Amazon, Microsoft, and Google led the way while many other stocks continued to fall, or rose much less strongly. However, in the last few weeks that has started to shift, with a resurgence of breadth in the market. Gainers have outpaced losers 2-to-1 over the last two weeks, as investors have started to believe in a strong economic recovery. That means previously underperforming large caps are starting to join small caps in rallying into the growing economic recovery.

FINSUM: This is the perfect time for large cap value. The economic recovery is underway and there are plenty of god value large caps that have room to rise because of unreasonable discounting from COVID.

(San Francisco)

The CME Group has published a piece about the outlook for FAAMG stocks in the context of the underlying economy. The CME notes that the FAAMG stocks now account for 22% of the total S&P 500, so their influence is skewing investors’ view of the underlying economy. The reality is that the S&P 500 minus those five stocks is a much more accurate—and much bleaker—representation of the economy. CME says that as the reality of a slow recovery starts to play out in the market’s consciousness, there is bound to be a correction in FAAMG stocks.

FINSUM: The law of gravity would seem to dictate that a fall in FAAMG is inevitable, but what is the catalyst for such a move? Their earnings are good as is growth momentum.

(New York)

You know the saying “a rising tide lifts all boats”? It couldn’t be further from the truth as it concerns the current stock market. The S&P 500 is just about flat, yet if you take a close look, 337 of its component stocks are down. The index is only being held up by a 1% gain from Apple and minor gains from the other 4 stocks that comprise 20% of its entire value. The lack of breadth has been a consistent feature of the recovery over the last several months.

FINSUM: Investors are not expressing any degree of bullishness about the economy, which would be reflected in breadth. Frankly, all the recent gains seem to be simple momentum bets on a small handful of stocks, making the whole recovery feel hollow.

(San Francisco)

Even the most die-hard Apple investor must be feeling a little woozy right now. The company’s market cap just surpassed $2 tn. And guess what—half of that came in the last five months. Yes, the company doubled in value since the start of the pandemic and is now worth $2 tn! A couple months ago many were saying Apple was a bargain, now it seems to have a very significant premium. So the big question for investors—is it time to cash out because things feel very toppy, or do you stick with it? The company’s earnings have been phenomenal. So good in fact that Goldman made a blunt comment about flubbing its forecasts, saying “It turns out that we and consensus weren't even in the ballpark in terms of what was possible.”

FINSUM: $2 tn is a scary number, but it feels like it would be wise to stick with Apple right now. Momentum is good and there does not seem to be a big headwind that would wound the stock.