Photographer: Brendon Thorne / Bloomberg
Photographer: Brendon Thorne / Bloomberg
Hedge funds fell in love with the tech giants after spending the last months of last year reducing these stocks.
Just a few days before the earnings from Apple Inc. and Amazon.com Inc., professional investors have transformed the industry more optimistically. On Tuesday, the cohort made the largest net purchase in a month, according to data compiled by main brokerage Goldman Sachs Group Inc. As a result, their net exposure to technology megacaps has grown at one of the fastest rates in recent years.
Their renewed interest reflects the confidence in the earning power of a group whose resilience was highlighted during the Covid-19 pandemic. The Big Five – Facebook Inc., Apple, Amazon, Microsoft Corp. and parent company Google Alphabet Inc. – are expected to report faster profit growth than the rest of the market for the 12th consecutive quarter, according to the analyst compiled by Bloomberg Intelligence.
“Just because we are coming out of an economic freeze related to Covid, this does not mean that the trend of digitization, software, automation disappears,” said Giorgio Caputo, senior fund manager at JO Hambro Capital Management. “Many of those companies with higher-capacity software and the Internet are very well positioned – advertising continues to move online, and companies continue to move to the cloud.”
The hedge funds pursued by Goldman Sachs have increased their exposure to technology megacaps, with their long / short group ratio rising to 20.5% from a low of 14% earlier this month. While the slope follows the peak levels observed last year, it flies in the face of the more widespread notion that technology giants will not be able to sustain their robust gains as the recovery expands.
Those who return more Technology-savvy include Sean Darby of Jefferies and Savita Subramanian of Bank of America Corp. In a poll this month, the bank’s money managers said they had reduced the technology’s allocation to a two-year minimum while pouring money into banks, small capital and energy stocks – the companies that benefited the most from an economic recovery.
For Gene Goldman, chief investment officer at Cetera Financial Group, the latest rush of hedge funds to buy technology is likely a tactical move to prevent positive earnings surprises in the coming weeks. Seen from a broader lens, he said, these monsters face two major winds: potentially higher interest rates that affect rich stocks and intensify government regulations.
“There is short-term optimism, almost like a last hurricane,” he said, adding that it comes “before rates rise and any of the high-tech concerns with a democratic government slow down.”
A rotation away from home trade makes sense amid progress in vaccines and government aid. Profits for the energy-to-industrial industries are expected to return this year, providing faster expansions in the S&P 500.
But The 17% rally from Netflix Inc. on Wednesday to the results of the explosion is a reminder of the risk of leaving too early. The tech-savvy Nasdaq 100 just posted one of the best weeks in terms of low capitalization in recent months, with a 4.4% rally – twice the Russell 2000 gain
While technology gains are expected to target the market this year and next, it is a testament to how well it did during the 2020 recession. For example, the growth in the combined profits of the big five technology companies is likely to lags behind with the beginning of the next quarter. However, at an estimated $ 224 billion, their 2021 profits will be 31% more than they earned in 2019, a year before the pandemic – four times the increase for other S&P 500 companies in this year. period.
Even this crisis of lower expansion is likely to be short-lived. According to analysts’ estimates, the technology giants will recover at the beginning of next year.
“The amazons of the world, the need for digital connection and digital communication, will not disappear even if 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