Displaying items by tag: tech

(New York)

The long-awaited (long-feared?) shake up of the S&P 500’s sectors will occur soon, and there is a lot of focus on how the tech sector, as traditionally defined, will change. Google and Facebook will be making the switch out of tech and into the new communications services sector. Netflix, as well as Walt Disney, Ford, and Nike will be joining them. There is some fear about the volatility that will be caused as big index trackers have to change their holdings on September 21st. Overall though, it seems like tech stocks (as traditionally thought of) will be winners, as having them distributed across multiple sectors will avoid the sector-weight limits many asset managers face.

FINSUM: Tech stocks will likely do well, but so will the companies getting grouped with them. As one analyst pointed out, AT&T and Verizon joining Google and Facebook is kind of liking outsiders getting invited to the cool kids’ party, which may help their share prices.

(San Francisco)

Faangs and the tech sector more generally have had a tumultuous year. There have been a lot of fears over regulation, valuation, and data breaches. Yet, on the whole, the performance has been strong. However, many investors are now turning against the faangs in a big way, as short bets against it have soared recently. There is now a $37 bn short position against the group of companies, up 40% in the past year. Amazon is the most shorted single stock, with around $10 bn of short interest against it. Faangs have accounted for almost half of the Nasdaq’s rally above 8,000.

FINSUM: The short interest is understandable given the lofty valuations, but the issue is that the underlying businesses look quite strong, which makes us doubtful there is going to be a coordinated faang crash of any grave magnitude.

(San Francisco)

Central bankers meeting at their annual gathering in Jackson Hole this week have a topic at the front of their minds—is rising corporate power hurting investment, wage growth, and productivity? Looking at the figures, the picture is mixed, but that is beside the point says the Wall Street Journal. The WSJ argues that investors should buy the monopolies the central bankers are worried about, because if the bankers are right, that will mean rising returns to capital. In other words, investors will be getting more and more of the rewards.

FINSUM: Market share in most of the US’ business sectors have been consolidating for years, and there are less and less publicly traded stocks as companies swallow each other. Corporate power is rising. However, for investors, this is a simple matter as more power will likely mean better payouts and returns.

(San Francisco)

Investors are currently anxious about the SEC’s investigation of Tesla and Elon Musk, not only over the infamous tweet, but also about guidance the company has given over the years. However, Bloomberg says investors shouldn’t be worried because the SEC is unlikely to take any serious action. Bloomberg points out that the San Francisco office of the SEC is woefully understaffed and outgunned and has almost no history of going after top tech executives, something that has led the tech sector to act with more impunity than in finance.

FINSUM: We aren’t sure we like this analysis much. If there were ever a time the SEC might want to make a statement, this would be it.

(San Francisco)

Talk about comments coming right from the source. Microsoft CEO Satya Nadella went on the record this week telling the market that tech companies should “expect” regulation. Nadella walked through current areas of tech and regulations, like facial recognition or GDPR, and explained their implications for the industry. He said that “As tech becomes more and more pervasive, I think for all of us in the tech industry we should expect—whether it’s on privacy or on cybersecurity or even ethics or AI—government and regulatory bodies to take interest in it”.

FINSUM: We think the writing is on the wall that tech is going to face some form of regulation, especially given that the Trump administration is rather hard on the sector. The question is when, not if.