Tech Is Rested And Ready

Since March 20, 2020, the Nasdaq 100 has risen 95% compared with 82% for the S&P 500. Year-to-date, however, they switched leadership positions:

Mobile Phone, Smartphone, 3D

Pixabay

Price Change Since 3/20/20 (%)
– – – – – – – – – – – – – – –

95.3 Nasdaq 100 (NDX, QQQ)
82.1 S&P 500 (SPX, SPY)

Price Change Year-to-Date (%)
– – – – – – – – – – – – – – –

11.7 S&P 500
6.0 Nasdaq 100

Chartist Arthur Hill of Trend Investor Pro wrote a week ago that the S&P 500 via SPY has remained above its 50-day simple moving average, while the Nasdaq 100 via QQQ broke below its 50-day in March and again earlier this month.

Momentum traders look at this and conclude that the tech-heavy Nasdaq 100 is a laggard to be avoided in the near term. Investors looking for longer-term value, however, talk about tech displaying growth at a reasonable price (GARP), a term we haven’t seen in a while.

The FAANGM stocks dominate the Nasdaq 100, as follows:

Nasdaq 100 Component Weight (%)
– – – – – – – – – – – – – – –

10.9 (AAPL) Apple
9.7 (MSFT) Microsoft
8.4 (AMZN) Amazon
7.7 (GOOG) Google
4.0 (FB) Facebook
1.7 (NFLX) Netflix

These are their year-to-date price changes:

FAANGM Price Change YTD (%)
– – – – – – – – – – – – – – –

+37.5 GOOG
+20.0 FB
+13.2 MSFT
+0.1 AMZN
-4.4 AAPL
-7.3 NFLX

But these are their EPS growth estimates for the current fiscal year, according to Yahoo Finance:

FAANGM Earnings Growth Est (%)
– – – – – – – – – – – – – – –

73 NFLX
58 AAPL
50 GOOG
35 MSFT
33 AMZN
30 FB

Tom Essaye at Sevens Report Research wrote that, “Considering the pace at which [these stocks] are growing earnings and the long-term prospects for these companies,” valuations are attractive. He thinks they’re the current GARP part of the market, about to retake the performance baton from smaller caps.

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You can learn more about the way I use leveraged ETFs in The Kelly Letter at jasonkelly.com

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