Technology Takes A Beating Today
Some interesting moves in the tech sector today. Maybe interesting is the wrong word, but I'm not going to go as far as calling it distressing. The vaunted FAANNG stocks (added the extra A for 'Apple' and N for 'Nvidia') took it on the chin in high volume as there was a flight to the laggards of the market like energy, healthcare and even some retail (aside from Amazon). Facebook was down 3.3%, Apple was down 3.9%, Amazon down 3.2%, Netflix down 4.7%, Nvidia down 6.5%, and Google down 3.4%. The combined trading volume of all of these was 213 million shares versus an average of 71 million. It wasn't just those names as other high flyers got hit as well (ex. Tesla). A key factor today was options expiry and a coincidental comment by Goldman Sachs that investors in FAANNG (although they used FAAMG, Microsoft being the M) stocks are underestimating risks. One can only speculate as to who was writing a lot of options contracts that expired today and could make a lot of money by issuing negative reports....Hmmm....That said, these stocks have been on a tremendous run and were due a pullback, but it seems a good portion of that was taken all in one day. These names are very "crowded" and a lot of passive investments own them all. So when they want to sell, they all have to go.
Overall we are not overly concerned. It's never nice to see your stocks sell of like they did today, but this is where knowing the stocks you own make a big difference. Of the aforementioned stocks, we only hold Apple as it is the only one of the six stocks that we feel has true value here. The others are quality companies and we respect them a lot, but do not see the value in holding shares at this time.
This brings up the topic of staying diversified, so while we had some tech that was down today, our other holdings in those laggard sectors vastly outperformed. The NASDAQ overall has been on a tear and while we may see a transition of market leadership to a more defensive stance, this will probably be short lived. The earnings season that just finished was quite robust and outlook continues to be positive. This should keep investors in the market for the time being.