A Comment -- General Comments From an Expert (A Commentary)
COMMENT
Tech stocks during this rotation Tech names are tradable now but only in the very short term: Facebook, Amazon, Apple, Spotify and Nvidia are at longer-term technical support and that's good. Last week, only 20% of big tech was trading above their 50-day moving average, usually meaning a tradable low signal. Bond sentiment is turning bearish, so rates could trade sideways for a bit, so you can play this oversold condition in tech tech trade. However, cyclicals will rule the day longer term especially in the summer with inflation fears.
COMMENT
Is the tech trade over? The play isn't going all in cyclicals, so tech is still alive. Tech won't outperform during historically low rates as it did in 2020, huge returns won't repeat. Don't throw the baby out with the bathwater. That said, certain tech will perform--Facebook, Apple and Google are trading at high-20s PEs compared to Crowdstrike at 200-300x. Two subsets here. You can't say all tech is untradable. For example, Microsoft still holds value. Look for solid balance sheets and sustainable growth.
COMMENT
Still looking at cyclical, economically sensitive areas? Yes. Last few years, with falling interest rates and very low economic activity, people have focused on things that act like bonds such as utilities, telcos, and REITs. People were willing to pay a premium for companies that had long-term, predictable, secular growth. In November/December, we started a new business cycle, with the market looking ahead 9-12 months. We're entering a new, significant reflationary cycle driven by stimulus. As opposed to owning things that are very predictable, he wants to own things that as revenue goes up, margins expand and profitability goes up.
COMMENT
What about rate-sensitive stocks that could be vulnerable if yields go up?(A Commentary)
Mar 11, 2021What about rate-sensitive stocks that could be vulnerable if yields go up? He's had very few of these, such as utilities, for over 6 months. From March to September, they were nowhere in the recovery. They may have been over-owned. SPHD compared to RDVY, dividend growth is knocking the stuffing out of high dividend stocks, because the market is setting up for slowly rising interest rates and a better economic cycle.
COMMENT
Energy stocks and the recovery. Energy stocks have been the last to get some mojo. The XOP is still flirting with the downtrend line. If the rest of the commodities keep going, the energy stocks should participate. XOM is a pretty good, conservative way to be there. CLR and PXD also look good. Or buy the XOP, which reduces business risk.
COMMENT
Semiconductors and the recovery. Semis are the basic building block of the modern economy. The most economically sensitive area. The group has gone through a correction. Highly doubts the rally is over. Huge shortage of chips. TER, LRCX, and AMAT all look attractive. Demand will be quite strong going forward.
COMMENT
Agriculture and the recovery. Agriculture is one of the big themes he's pursuing. He's been using MOO, which has been making relative strength new highs. Agriculture has recently been breaking out to new highs. SMG would fit in here. Technically, a good time to buy. Looks very, very good through $220. Also owns NTR. Doesn't own CF, but he could. This group is one you want to have your eye on.
COMMENT
Where to put profits taken from tech right now? Tech has been the golden goose for a long time. Many of the stocks are over-owned. But people have been using them as a piggy bank the last couple of months. There's limited downside risk to large cap tech right now. But they do have challengers for new money. Financials are charging, and just made its first new high since 2007. Also industrials and basic materials. He'd buy MSFT, as it's held in the best. You might look at a semi stock like LRCX. Consider another group, such as financials or industrials, as these have a little more upside.
COMMENT
Are the tech stocks finally rolling over? Not so sure. When the NASDAQ was getting into correction territory, it looked as though tech would go down, but tech had a big bounce yesterday. Recent moves reflect the rotation in the market. People are favouring stocks more levered to a reopening economy. He's finding a lot of value in tech recently, which hasn't been true for a while.
COMMENT
What about the cyclicals such as materials, chemicals, and transport, which traditionally benefit from an economic uptick? He has exposure to these areas, as well as to Canadian real estate. Fundamentals will improve. Hitting fresh all-time highs is a good sign. But how much has already been priced in? When some of the more rate-sensitives sell off, he's seeing some good opportunities, such as in utilities and renewables.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Although the market rotation was quite violent, it is normal market action following big gains. Markets tend to be fine with higher interest rates when there is growth. Having both value and growth stocks is the preferred strategy. Unlock Premium - Try 5i Free
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COMMENT
$1.9 trillion stimulus relief passes into law. Consumers may splurge after saving so much and now with this stimulus. Travel has been completely shut down, so this is a big area for spending. The airlines are priced in, so no comeback here. This rotation continues as tech high-flyers are really not bouncing back, though sort of yesterday. Even with stimulus, today's interest rates didn't move, so she's surprised by the reaction to stimulus. We knew the reopening trade was going to happen. This could be Buy The Rumour and Sell The News.
COMMENT
He doesn't get too fussed with the markets on any given day, but how long will recovery take to kick in and how long will it last? A lot of people remain unemployed and businesses closed. The bounce-back won't be sharp as people expect. Longer-term, utilities offer solid dividend growth, based on contracted revenues; utilities remains safe as well as financials. Nice to see the banks return to former levels.
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