Think back – way back. All the way back to last Friday which, in the era of Donald Trump’s presidency, seems like about 47 years ago.
On the strength of upbeat earnings – most notably from Amazon which delivered a quarter that, as I wrote in a piece for DealBreaker, “included a mile-long list of ‘highlights’ that reads like a world domination manifesto penned by some guy having a bipolar manic episode while barricaded in his basement one night” – big cap tech sent everyone off to the weekend on a high note. It was, as we put it, “a good day for the future.”
Specifically, the Nasdaq 100 had its best day versus the broad market since 2009. Well, how about another super “bigly” Friday Nasdaq stat to start your day? Consider this from BofAML:
Last Friday, the NDX finished the day up 2.91%. On a voladjusted basis this represents the largest daily gain in the history of the Index (since 1985).
In what comes across as a kind of pseudo-lament, the bank notes that fighting this wave is tough:
Strong corporate earnings propelled tech stocks higher, confirming that while there are some risks to owning the sector (e.g., crowded positioning), it is hard for now not to love tech given strong balance sheets, healthy cash returns, and growth exposure without beta.
Indeed. But just remember your Howard Marks:
The FAANGs are truly great companies, growing rapidly and trouncing the competition (where it exists). But some are doing so without much profitability, and for others profits are growing slower than revenues. Some of them doubtless will be the great companies of tomorrow. But will they all? Are they invincible, and is their success truly inevitable?
[But] can investors in technology can really see the future, and thus how happy they should be paying prices that incorporate optimistic assumptions regarding long-term earnings power. Of course, this may just mean the best is yet to come for these fairly young companies.