Apple climbed for 11 days. What's driving big tech rally?
- Big tech rally back?
$Apple (AAPL.US)$ posted its 11th straight day of gains on Tuesday Mar. 29, 2022, its longest winning streak since 2003. This record has sent the largest U.S. market-cap stock into the green in 2022, only $3.7 shy of its all-time-high $182.706 in January.
Apple is not alone. Among other big tech bellwethers, $Tesla (TSLA.US)$, $Amazon (AMZN.US)$, and $Microsoft (MSFT.US)$ follows the same momentum in recent days, with the first two also posting positive performances this year. And the tech-heavy $Nasdaq Composite Index (.IXIC.US)$ is still down 7%* this year.
* From the open of 15, 732.5 points on Jan. 3, 2022 to the 14, 619.64 points on Mar. 29, 2022.
- What's behind the rebound of Apple-like tech giants?
The recent rally was closely related to the Ukraine-Russia war and the possible ceasefire has lifted up investors risk sentiment as analysts are more optimistic about earnings outlook.
In addition, some analysts say tech stocks are less affected by inflation because their profits are largely immune to higher commodity prices than manufacturing and consumer goods companies. Though higher interest rates hurt the present value of future profits, hurting growth stocks with lofty valuations, including technology, which again highlights the importance of buying a good company at a fair price.
- Insights on the Street
“The sell-off got overdone, and took these big tech names down to levels that were very attractive,” said David Katz, chief investment officer at Matrix Asset Advisors. “Apple is a very strong and dynamic growth company, and it remains at the better end of the pack in terms of its valuation.”
To Bill Stone, chief investment officer at Glenview Trust Co., the rally in big tech is a matter of investors looking to add to portfolios after the selloff and seeking out stocks with the highest returns on capital and low amounts of debt. “We've been telling clients to move to quality in case we go into a recession. “Companies with low debt and high returns on capital won't suffer as much.”
- Investing hacks time
It has become clearer for retail investors to find good companies that can help us hedge against unexpected volatility and deliver profits.
Before we move on to the next topic -- what makes a good stock -- hopefully the chart below will give you some ideas.
While the macroeconomic environment may change over time, the characteristics of good company stocks do not.
The criteria for choosing good stocks vary from investor to investor. But those fundamentals-related aspects tend to be the same. Stable and growing earnings, high return on equity (ROE), high dividend yield, and positive cash inflows are eternal indicators of the financial success of companies that may be good investments.
moomoo Learn brings four commonly used stock selection criteria. For more detailed information, please refer to the Financial characteristics of good stocks.
Stable and growing earnings
Earnings are essential for a stock to be considered a good investment. Earnings can be evaluated in any number of ways, but three of the most prominent metrics are growth and stability.
High ROE
Return on equity (ROE) measures the ability of a company's management to turn a profit on the money that its shareholders have entrusted it with.
High dividend yield
The dividend yield—displayed as a percentage—is the amount of money a company pays shareholders for owning a share of its stock divided by its current stock price. Mature companies are the most likely to pay dividends.
Positive cash inflow
The term cash flow refers to the net amount of cash and cash equivalents being transferred in and out of a company.
For more investment knowledge and trends, moomoo Learn is always here.
For more investment knowledge and trends, moomoo Learn is always here.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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