We See Dead Stocks

This takes us to CSCO, which was the largest cap stock in the S&P 500 Index on March 27, 2000:

Source: Bloomberg. Data for the time period 12/31/1999 – 10/2/2002.

There were three bear market rallies of 38%, 71% and 94% on its way to the bottom. How could you have figured out that Bruce Willis’ character, the psychologist, was dead if he kept rallying like that in the movie? After all, he was giving the young boy great advice in his nightmares.

Intel was no exception to the rule. It had a 31%, 43% and an 85% gain inter-mixed with regular massive declines, which drove investors into a hiding place with a blanket pulled over their head. I can still see the tears of other people in the investment business who took the brunt of this abuse, and they didn’t even have Cole’s mother there to console them.

Source: Bloomberg. Data for the time period 12/31/1999 – 10/2/2002.

If today’s e-commerce glam stocks peaked last year as the multi-bubble chart shows they might have, could this current rally in shares of Netflix (NFLX) and Amazon (AMZN) be the one of the big rallies? Are these rallies part of the process of bottoming them for an extended purgatory period like the last tech euphoria episodes? Here are the charts of what has happened in these glam stalwarts since they peaked in 2018:

Source: Bloomberg. Data for the time period 1/16/2018 – 1/15/2019.

After peaking at $2,039 per share on September 4th of 2018, AMZN has had rallies of 15%, 19%, and 24%. Did we mention that it was the largest cap company in the S&P 500 Index at the top?

NFLX has rallied 20% and 52% since it’s top on July 9, 2018, when it peaked at $419 per share.

Source: Bloomberg. Data for the time period 1/16/2018 – 1/15/2019.

One of the ways that we can see a repeat of the tech bubble episode is the boldness that numerous industry experts and stock pickers are showing by recommending and being optimistic about the e-commerce glam stocks. This is the same way that dot-com experts and analysts behaved back in 1999 and early 2000. Fortunately, for many investors, most of those experts have found new occupations. Have you heard anyone in the media lately say anything but positive things about the glam companies? Our rule is that if everyone is calling an up move a bear market rally, it is likely a new bull market. If they are all viewing it as a minor interruption in a bull market and touting how much these favorites are going to go up, you need to crawl into your bedroom and pull over the covers, or at a minimum put on your headphones.

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Disclosure: This article contains information and opinions based on data obtained from reliable sources, which is current as of the publication date, and does not constitute a recommendation ...

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Cynthia Decker 1 year ago Member's comment

Great title.