Since March 20, 2020, the Nasdaq 100 has risen 95% compared with 82% for the S&P 500. Year-to-date, however, they switched leadership positions:
Price Change Since 3/20/20 (%)
– – – – – – – – – – – – – – –
95.3 Nasdaq 100
82.1 S&P 500
Price Change Year-to-Date (%)
– – – – – – – – – – – – – – –
11.7 S&P 500
6.0 Nasdaq 100
Chartist Arthur Hill of Trend Investor Pro wrote a week ago that the S&P 500 via SPY has remained above its 50-day simple moving average, while the Nasdaq 100 via QQQ broke below its 50-day in March and again earlier this month.
Momentum traders look at this and conclude that the tech-heavy Nasdaq 100 is a laggard to be avoided in the near term. Investors looking for longer-term value, however, talk about tech displaying growth at a reasonable price (GARP), a term we haven’t seen in a while.
The FAANGM stocks dominate the Nasdaq 100, as follows:
Nasdaq 100 Component Weight (%)
– – – – – – – – – – – – – – –
10.9 AAPL Apple
9.7 MSFT Microsoft
8.4 AMZN Amazon
7.7 GOOG Google
4.0 FB Facebook
1.7 NFLX Netflix
These are their year-to-date price changes:
FAANGM Price Change YTD (%)
– – – – – – – – – – – – – – –
+37.5 GOOG
+20.0 FB
+13.2 MSFT
+0.1 AMZN
-4.4 AAPL
-7.3 NFLX
But these are their EPS growth estimates for the current fiscal year, according to Yahoo Finance:
FAANGM Earnings Growth Est (%)
– – – – – – – – – – – – – – –
73 NFLX
58 AAPL
50 GOOG
35 MSFT
33 AMZN
30 FB
Tom Essaye at Sevens Report Research wrote that, “Considering the pace at which [these stocks] are growing earnings and the long-term prospects for these companies,” valuations are attractive. He thinks they’re the current GARP part of the market, about to retake the performance baton from smaller caps.
If he’s right, it bodes well for our 9Sig plan. Even at 3x leverage, its TQQQ stock fund has trailed 2x MVV and 1x IJR this year:
Price Change YTD (%)
– – – – – – – – – – – – – – –
+33.5 MVV (2x)
+19.4 IJR (1x)
+12.0 TQQQ (3x)
9Sig may be primed for another leadership phase.
Conclusion: Tech is rested and ready.
