The S&P 500 Is More Concentrated Than Ever: Time To Short Some Tech Companies?

by ricenbeats

Look at this goddamn chart: imgur.com/gallery/scPTvaH

Strong indicator that there is about to be a big drawn down of value among the top five. But given the circumstances, how will it play out the next ten years? What will be the top five ten years from now?

Amazon: Seems best positioned for success given e-commerce and cloud are their two biggest businesses.

Microsoft: Also looks to be on solid footing given cloud and collaboration apps. Only company that was a top 5 in the early 2000s as well. Has proven it can reinvent itself.

Apple: Has a ton of cash on the sidelines but current outlook doesn’t look great, as people will probably delay buying new hardware for a year or two, or buy the cheaper options they are rolling out. A lot of supply chain exposure to China, and we could see a lot of that brought back home for security / political / unemployment reasons, which will eat at their margins.

Google and Facebook: I think the least well positioned. I work in digital advertising and am seeing budgets cut left and right. Search activity is almost directly tied to demand for products, and given this is a demand-side crisis that doesn’t bode well for Google. Facebook might be in a better spot since people are glued to social media, which is an opportunity for creative advertisers to sell them shit.

The questions and setup are here. Does this concentration last? Who falls out of the top five to short? Who replaces them?

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.