5 big tech stocks build market euphoria, and jitters
In just three years, their share prices have risen far beyond the major market indexes — Amazon leads the way, up 206 percent; Apple trails with a 67 percent return — as investors of every stripe have piled into these companies.
[...] this gold-rush mentality, reminiscent of investor frenzies for Nifty 50 stocks in the late 1970s, and the dot-com boom and bust at the end of the last century, is now giving investors pause.
“There is valuation anxiety out there, that is for sure,” said Ed Yardeni, an independent investment strategist who often highlights the influence of these stocks in his research notes.
Despite some nervousness about a potential bubble, stock indexes remain near recent record highs (without adjustment for inflation).
Stocks were slightly higher in cautious trading Wednesday on the eve of several potentially market-moving events on Thursday, including the British election and testimony from James Comey, the former FBI director.
During the late stage of any bull market, investing in high-flying momentum stocks requires investors to balance conflicting sentiments of greed and fear.
According to FactSet, a data provider, since 2012, mutual fund, pension fund and hedge fund holdings in these five stocks have more than doubled to $1.4 trillion from $558 billion — a consequence of investors buying up stocks that are rapidly increasing in value.
The push into these stocks has been driven by retail investors in traditional mutual funds, exchange traded funds and owning the stocks directly.
Through these channels, retail investors now own 60 to 70 percent of these stocks — an exposure of large amounts of money to a small selection of stocks that investment experts say is unprecedented.
[...] when Facebook’s net earnings leap to $10 billion from $1.4 billion in four years, or Amazon’s sales jump to $135 billion from $74 billion, investors take notice.
[...] in many cases investors are calculating that in the long term, earnings growth will catch up with sales expansion as well as heavy investment spending designed to put competitors out of business.
Nygren contends that the company is trading at a bargain to the market as opposed to a premium, if you take into consideration Google’s cash pile and the potential of YouTube to make a lot of money.
[...] as investors pour billions of dollars into exchange traded funds — a record $314 billion in the last year alone — no active manager can afford to to lag the competition for too long these days.
[...] be it a mutual fund, hedge fund, sovereign wealth fund or family office, the strategy has been consistent — put aside your fears and stay invested.
“It’s like you are riding a missile that you know could explode at any moment beneath you,” said Julian Brigden of Macro Intelligence 2 Partners, an independent research company based in Vail, Colo.