Photographer: Brendon Thorne / Bloomberg
Photographer: Brendon Thorne / Bloomberg
Hedge funds have once again fallen in love with the tech giants after spending the last few months of last year reducing those stocks.
A few days before the profits made products like Apple Inc. and Amazon.com Inc., professional investors became more optimistic in the industry. On Tuesday, the cohort made its largest net purchase in a month, according to data compiled by Goldman Sachs Group Inc.’s main broker. As a result, its net exposure to megacaps of technology jumped to one of the fastest rates in recent years.
His renewed interest reflects confidence in the gain power of a group whose resistance has been underscored during the Covid-19 pandemic. The big five (Facebook Inc., Apple, Amazon, Microsoft Corp. and Google’s Alphabet Inc.) are expected to report faster profit growth than the rest of the market for the 12th consecutive quarter, according to analysts compiled by Bloomberg Intelligence.
“Just because we’re coming out of a Covid-related economic freeze, that doesn’t mean the trend of digitization, software and automation is going away,” said Giorgio Caputo, senior fund manager at JO Hambro Capital Management. “Many of these capitalized software and Internet companies are very well positioned: advertising continues to move online and companies continue to move to the cloud.”
Hedging funds tracked by Goldman Sachs have increased exposure to technology megacaps, with a long / short ratio of the group rising to 20.5% from a low of 14% reached earlier this month. While peak tilt levels were observed last year, it flies in the face of the broader idea that tech giants won’t be able to maintain their robust gains as the recovery expands.
The ones that spin the most Cautionary studies in technology include Sean Darby of Jefferies and Savita Subramanian at Bank of America Corp. energy actions: the companies that have benefited most from an economic rebound.
For Gene Goldman, chief investment officer of Cetera Financial Group, the latest rush of hedge funds in technology buying is likely to be a tactical step in achieving positive earnings surprises in the coming weeks. Seen from a broader perspective, he said, these monstrosities face two major headwinds: potentially higher interest rates that hurt rich values and intensified government regulation.
“There is optimism in the short term, almost like a last hurricane,” he said, adding that “before rates rise and any of the concerns surrounding big technologies with a Democratic government slow it down.”
A rotation outside of the home-stay business makes sense amid progress in vaccines and government aid. Industry profits, from energy to industrial, are expected to decline this year, offering a faster expansion to the S&P 500.
But The 17% concentration of Netflix Inc. Wednesday on the explosive results is a reminder of the risk of leaving too soon. The Nasdaq 100 Index, which has been technologically powerful, has just posted one of its best weeks in relation to small caps in recent months, up 4.4%, double Russell 2000’s gain.
While technology revenues are expected to follow the market this year and next, it is a testament to the good performance they had during the 2020 recession. For example, the combined profits growth of the five major technology companies is likely to will be delayed from next quarter. However, with an estimated profit of $ 224 billion, its profits for 2021 will be 31% above those earned in 2019, the year before the success of the pandemic, four times the growth of other S&P 500 companies during this period.
Even this period of lower expansion is likely to be short-lived. According to analysts ’estimates, the tech giants will regain their advantages early next year.
“The world’s amazons, the need for digital connection and digital communication, will not go away even as the economy improves,” said Nela Richardson, chief economist at ADP. “There is a growing recognition that the dominance of technology continues to persist.”
– With the assistance of Vildana Hajric