If we assume that mega cap tech is now out of favour following Thursday’s big decline, either the shares continue to fall or go sideways, where else could funds travel?
Here is a quick rundown of the top decliners from Thursday (September 3). The 15 names here are a near perfect match for a list of best large/mega cap stock performers year-to-date. From that we can understand that there is profit-taking going on.
Top 15 Tech losers (Sept 3 perf)
Peloton Interactive -9.64%
NVIDIA -9.28%
Tesla -9.02%
Skyworks Solutions -8.73%
Apple -8.01%
Autodesk -7.71%
Microsoft -6.19%
Plug Power -12.10%
Vroom -12.18%
Zoom video communications -9.97%
Nikola -8.35%
AMD - 8.51%
Slack -7.93%
Shopify -5.48%
JD.com -5.01%
Chart
After the big drop Thursday, this is a quick 3-month performance review of some of the classic names that fit into each of these 3 groups.
We can see that COVID tech ( Tesla , Zoom, Plug Power ) sold off, reopening trades (cruise lines, banks) rebounded and in the middle were some tech favourites that fared a little better (Alphabet , Twitter etc).
With this in mind, we can outline two possible strategies moving forwards as an alternative to buying the big 15 COVID tech losers from Thursday.
Strategy 1: Reopening stocks
When the market has a big daily decline, it’s a useful time to look at the relative performance of the different shares within the index. As we said before, the biggest risers this year were the biggest losers on Thursday. Conversely the biggest losers in 2020- that’s the companies that got hardest hit from travel restrictions and a big contraction in the economy - did the best on Thursday.
If you’re of the view that there is a durable rotation going on, completely away from the pandemic favourites and towards stocks that have a long way to catch up once the economy returns to ‘normal’ then the shares below might be of interest.
Top 10 Reopening Winners (Sept 3 perf)
Carnival Corporation +5.21%
Royal Caribbean +2.68%
Norwegian Cruise Line Holdings +3.77%
Macy’s +7.94%
Wells Fargo +0.04%
Royal Dutch Shell +0.54%
Goldman Sachs +0.07%
JP Morgan Chase 0%
Capital One +0.79%
Moderna +0.19%
Strategy 2: Alternative tech
If you’re determined to buy tech because that’s the only thing that’s really been working this year BUT you want to shy away from the big fallers on Thursday, then you can look towards other areas in the tech sector. Most tech stocks fell but there were some big names that fell less, showing relative out-performance. Most of these companies have seen a significant recovery from this years low already but didn’t participate in the call-option induced mania that effected companies like Tesla.
Top 8 RoW Tech (Sept 3 perf)
Alphabet -5.00%
Netflix -4.9%
Tencent -4.82%
Electronic Arts -4.83%
Twitter -4.67%
Amazon -4.63%
Weibo -4.64%
Nintendo +0.02%
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