Photographer: Brendon Thorne / Bloomberg
Photographer: Brendon Thorne / Bloomberg
Hedge funds have fallen in love with technology giants again after cutting back on these stocks in the last months of last year.
Only a few days before the earnings of Apple Inc. and Amazon.com Inc. landed, professional investors revived the industry better. The group made its largest net purchase in a month on Tuesday, according to data released by Goldman Sachs Group Inc. As a result, their net exposure to technological mega-maps has jumped at one of the fastest steps in recent years.
Their renewed interest reflects confidence in the merits of a group whose resilience was underlined during the Covid-19 pandemic. The big five – Facebook Inc., Apple, Amazon, Microsoft Corp. and Google’s parent Alphabet Inc. – is expected to report faster profit growth for the 12th consecutive quarter than the rest of the market, the analysis calculations compiled by Bloomberg Intelligence. .
“Just because we’re coming out of an economic freeze with Covid does not mean that the trend towards digitization, software and automation is disappearing,” said Giorgio Caputo, senior fund manager at JO Hambro Capital Management. “A lot of the software and internet companies with bigger capital are very well positioned – advertising continues to move online, and companies continue to move to the cloud.”
Hedge funds tracked by Goldman Sachs have increased exposure to technology megacards, with their long / short ratio in the group to 20.5% from a low of 14% reached earlier this month. Although the slope peaks were seen last year, it flies in the light of the general perception that the technical giants will not be able to maintain their strong gains as the recovery expands.
Those who turn more cautious about technology includes Sean Darby of Jefferies and Savita Subramanian at Bank of America Corp. In a survey this month, the bank’s money managers said they had reduced the technological allocation to a two-year low, while investing money in banks, small capitals and energy stocks – companies that benefit most from an economic recovery.
For Gene Goldman, chief investment officer of Cetera Financial Group, the latest hedge fund in technology buying is likely to be a tactical move to prepare for positive earnings surprises in the coming weeks. Viewed from a wider lens, he said, there is a major headwind of these shepherds: potentially higher interest rates, hurting highly valued equities, and tightening government regulations.
“There is optimism in the short term, almost like a last hurray,” he said, adding that it comes “before rising rates and concerns about big technology with a Democratic government slow it down.”
A turnaround in home trade makes sense amid advances in vaccines and government aids. Profits for industries from energy to industry are expected to fall this year, leading to faster expansions in the S&P 500.
But Netflix’s 17% series Wednesday on standout results is a reminder of the risk of leaving early. The technology-heavy Nasdaq 100 index has placed just one of its best weeks compared to small capital in recent months, with a 4.4% increase – twice the Russell 2000 profit.
While technical earnings are expected to follow the market this year and next, this is proof of how well it performed during the recession in 2020. For example, the growth in the five major technology companies’ combined profits is likely to continue with the next quarter left behind. At an estimated $ 224 billion, their profit in 2021 will be 31% above what they earned in 2019, the year before the pandemic – four times the growth for other companies in the S&P 500 during that period.
Even these effects of sub-expansion are likely to be short-lived. According to calculations by analysts, the technical giants will get their benefit early next year.
“The Amazons of the world, the need for digital connectivity and digital communication is not going to go away, just as the economy is improving,” said Nela Richardson, chief economist at ADP. “There is a growing recognition that the dominance of technology continues.”
– Assisted by Vildana Hajric