by Jeff Marcus
DIVERGENCE CONTINUES – THE BIG GET BIGGER AND THE SMALL GET TINY
Each day TPA shows clients how the largest and most popular stocks are faring in the TPA Canaries in the Coalmine. TPA’S two custom indexes, BIGTECH* and FAANNGT** (a FANG derivative) are seen relative to the S&P500 on a 5-day, 1-month, 3-month and 6-month basis (table below). TPA has been saying for 2 months that the largest growth stocks were and will continue to outperform (see excerpts from the 2/18, 4/8, and 4/15 World Snapshots below). The outperformance has now become gargantuan.
The second table and following 2 charts below show performance difference between BIGTECH, FAANGT, S&P1500 TECH Indexes and the benchmark S&P500 over the past year and 2020 YTD. BIGTECH and FAANGT have outperformed the S&P500 by 22% and 45%, respectively, over the past year and 24% and 44%, respectively, so far in 2020. These numbers are staggering.
TPA sees 2 forces at play here. The first is ability and nature of the stocks in BIGTECH and FAANNGT to wield almost monopolistic power and the second is their more recent ability to remain unaffected or even prosper from the recent pandemic. As TPA explained in its reports on 2/18, 4/8, and 4/15, this pattern should continue unabated. The only chance for the pattern to be interrupted was anti-trust or some other regulation from government. Given the recent state of the world, governments focus will be elsewhere for months and perhaps years to come.
*AAPL, MSFT, AMZN, FB, CMCSA, GOOGL, INTC, CSCO
**FB, AAPL, AMZN, NFLX, NVDA, TSLA
4/8/20 World Snapshot
“ TPA would argue that the action from the 3/23 low is the result of investors just buying the most beaten down stocks, THE TRASH, versus buying companies that are poised to do well during the remainder of the crisis…..TPA sees NDX continuing the longer term pattern of outperforming its older brother; the DJIA.”
4/15/20 World Snapshot
“The stock market in 2020 is now an ongoing story of a great divergence between winners and losers. TPA breaks this widening divide down into 4 categories: 1. BIGTECH versus the broader market, 2. Large Cap versus Small Cap, 3. Growth versus Value, 4. Energy and Energy-related versus everything else….”
Even before he pandemic, TPA was positive on BIGTECH, TECH and Large Cap Growth.
2/18/20 World Snapshot
“What is Good:
1. BIGTECH has recovered and is very strong…
2. In line with #1, Large Cap growth continues to power ahead…
3. TECH overall is consistently strong in all 3 periods. TECH’s strength can also be seen in the subsector analysis….”
