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$AAPL.US$ Why This Top Strategist Says Big Tech Still Has Room to Run -- Barrons.comMentioned:AAPL AMZN ASML MSFT SAPBy Reshma Kapadia
Nicholas Colas writes a widely-read morning note for money managers that draws on the New Yorker's 30-year career on Wall Street, filled with insights gleaned from economic data, market dynamics, investor psychology, and disruptive trends.
Colas, co-founder of DataTrek Research, got his first glimpse of Wall Street from the mailroom of what is now Alliance Bernstein as the mutual fund industry was taking off in the mid-1980s. Colas began his official Wall Street career in 1991 as an equities analyst covering autos for Credit Suisse. He went on to work at SAC Capital, where he learned from hedge fund manager Steve Cohen the importance of understanding emotions in investing, and later worked at other firms as a market strategist and head of research before launching DataTrek in 2017. Colas has been bullish on Big Tech and the power of disruption for years, and began writing about Bitcoin in 2013.
Barron's talked with Colas about why he still likes U.S. stocks despite inflation, high valuations, and the risks of Omicron. In this edited version of our conversation, we also find out why he says it's crucial for investors to learn financial modeling and monitor cryptocurrency developments.
Barron's: What's the biggest shift caused by the pandemic that is most relevant to investors?
Nicholas Colas: Inflation. That has been the biggest change in the economy. Stuff costs more -- and not a little, but a lot more, and over two years. Food is up 15%; wages are not. As an investor, we have to think about how inflation will ebb and flow and impact corporate profitability. For big companies, it's good for profits.
Are worries about inflation's impact on corporate earnings misplaced?
So few analysts know how to model a company anymore. I was trained by people who built their careers in the 1970s. It comes down to understanding how costs flow through an income statement. People think if PPI [the producer price index] is up 4% and inflation is up 4%, earnings don't grow. That is absolutely wrong. Every company has a fixed cost structure that doesn't move with inflation. We see this in the data: Corporate profits in the 1970s grew just as fast as inflation did -- and the stock market grew just as fast as earnings.
The linchpin of this market is -- and has been -- corporate earnings. It's totally reasonable to think about $240 for S&P 500 earnings next year; the Street is at $222. For perspective, we were at $162 to $163 in years prior to the pandemic. We have set a new step function in corporate earnings -- and it seems permanent.
How can margins stay high, even as companies deal with rising labor costs, supply-chain issues, and regulatory pressures?
Pricing power. The S&P 500 is very different from any other index on the planet. It has two things going for it: Primarily it works in the U.S. economy, and U.S. fiscal and monetary policy was orders of magnitude more aggressive than Europe and Asia. So that was a huge bump, and allowed margins not to go to zero during the recession.
And we are talking about large U.S. companies, which have huge advantages in economies of scale and scope over smaller companies, and, because of the cash flows they generate from their U.S. operations, have much stronger competitive positioning overseas. The most important thing we have is big technology. It's impossible to overstate how important it is to have 20% of the S&P 500 in [Alphabet's] Google [ticker: GOOGL], Apple [AAPL], and Microsoft [MSFT]. There's simply no way to line up those business models with anything else.
These companies have been winners for years. Can that really continue?
There's human bias to momentum but also investment validity to sticking with momentum. I'm not talking about momentum [as a factor], but rather fundamentally things that are holding and increasing their competitive position. I don't see a reversion to the mean for tech margins because these companies have competitive positions in ways we haven't seen before, maybe besides Rockefeller's oil company and Vanderbilt's rail. Oil was relevant for 60 years, so when they say data is the new oil, it suggests data has a competitive window longer than traditional business models.
Should investors be buying dips in these stocks?
That's a separate discussion about how much confidence investors have in the global economic recovery. Probably in the second quarter, you will have a burst of enthusiasm for a synchronized global recovery -- and you could see Big Tech underperform for a couple of quarters because people will be enthusiastic about fin
Nicholas Colas writes a widely-read morning note for money managers that draws on the New Yorker's 30-year career on Wall Street, filled with insights gleaned from economic data, market dynamics, investor psychology, and disruptive trends.
Colas, co-founder of DataTrek Research, got his first glimpse of Wall Street from the mailroom of what is now Alliance Bernstein as the mutual fund industry was taking off in the mid-1980s. Colas began his official Wall Street career in 1991 as an equities analyst covering autos for Credit Suisse. He went on to work at SAC Capital, where he learned from hedge fund manager Steve Cohen the importance of understanding emotions in investing, and later worked at other firms as a market strategist and head of research before launching DataTrek in 2017. Colas has been bullish on Big Tech and the power of disruption for years, and began writing about Bitcoin in 2013.
Barron's talked with Colas about why he still likes U.S. stocks despite inflation, high valuations, and the risks of Omicron. In this edited version of our conversation, we also find out why he says it's crucial for investors to learn financial modeling and monitor cryptocurrency developments.
Barron's: What's the biggest shift caused by the pandemic that is most relevant to investors?
Nicholas Colas: Inflation. That has been the biggest change in the economy. Stuff costs more -- and not a little, but a lot more, and over two years. Food is up 15%; wages are not. As an investor, we have to think about how inflation will ebb and flow and impact corporate profitability. For big companies, it's good for profits.
Are worries about inflation's impact on corporate earnings misplaced?
So few analysts know how to model a company anymore. I was trained by people who built their careers in the 1970s. It comes down to understanding how costs flow through an income statement. People think if PPI [the producer price index] is up 4% and inflation is up 4%, earnings don't grow. That is absolutely wrong. Every company has a fixed cost structure that doesn't move with inflation. We see this in the data: Corporate profits in the 1970s grew just as fast as inflation did -- and the stock market grew just as fast as earnings.
The linchpin of this market is -- and has been -- corporate earnings. It's totally reasonable to think about $240 for S&P 500 earnings next year; the Street is at $222. For perspective, we were at $162 to $163 in years prior to the pandemic. We have set a new step function in corporate earnings -- and it seems permanent.
How can margins stay high, even as companies deal with rising labor costs, supply-chain issues, and regulatory pressures?
Pricing power. The S&P 500 is very different from any other index on the planet. It has two things going for it: Primarily it works in the U.S. economy, and U.S. fiscal and monetary policy was orders of magnitude more aggressive than Europe and Asia. So that was a huge bump, and allowed margins not to go to zero during the recession.
And we are talking about large U.S. companies, which have huge advantages in economies of scale and scope over smaller companies, and, because of the cash flows they generate from their U.S. operations, have much stronger competitive positioning overseas. The most important thing we have is big technology. It's impossible to overstate how important it is to have 20% of the S&P 500 in [Alphabet's] Google [ticker: GOOGL], Apple [AAPL], and Microsoft [MSFT]. There's simply no way to line up those business models with anything else.
These companies have been winners for years. Can that really continue?
There's human bias to momentum but also investment validity to sticking with momentum. I'm not talking about momentum [as a factor], but rather fundamentally things that are holding and increasing their competitive position. I don't see a reversion to the mean for tech margins because these companies have competitive positions in ways we haven't seen before, maybe besides Rockefeller's oil company and Vanderbilt's rail. Oil was relevant for 60 years, so when they say data is the new oil, it suggests data has a competitive window longer than traditional business models.
Should investors be buying dips in these stocks?
That's a separate discussion about how much confidence investors have in the global economic recovery. Probably in the second quarter, you will have a burst of enthusiasm for a synchronized global recovery -- and you could see Big Tech underperform for a couple of quarters because people will be enthusiastic about fin
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2021 is the first year i started to invest in stocks. What a rocky year to start off with🤣 l’d like to share my 3 biggest mistakes and experiences as a new investor.
First of all, I recalled that I had a dilemma - buy at all time high if not it will go higher and never come back down OR wait till it drops. It’s scary to see the price increasing higher and higher. I asked myself “do I buy now when it’s all time high or wait and buy when the price drops?” I waited only to see it increased 😂 and I hurried to enter the market to buy only to see it dropped and dropped further 🥲
One other mistake I made was not a very smart decision to buy shares of a single company with a lump sum and lastly, the mistake was to invest ALL my capital in my portfolio.
What’s wrong with the mistake above and what have I learned is that, firstly, I learned to ONLY buy what I can afford. When we see the price at all time high, we all hope for a discount but it can go either way so i have decided to BUY only if I can AFFORD to LOSE. Of course, I have to do homework to find out if it’s a good company that I can invest in for a long term.👍
Secondly, investing with a lump sum with all capital made me realise that I do not have enough cash to buy when the price drops for dollar cost averaging and i realised I have to keep checking on my account balance because I fear that I might blow my account.
So what I did was that I decided to sell one of the stocks that takes up a greater portion of my portfolio. And before I decide to sell, I was hoping that it will go up to breakeven. However it didn’t and I sell at a greater loss. Good news is that I was still able to preserve most of it. 🥲
This investment experience allows me to realise the importance of patience, value and risk management. I learned that the guts to selling stock (that is either going to harm your capital or losses its value) at a loss is also a must-have in order to prevent the losses from snowballing.
When I first started out, I focused on growth stocks. Now with the extra capital from what I sold as mentioned above, I invest part of it into SG dividend stocks, with the rest as back up capital. This allows me to not worry so much when the market crashes as I have the capital to dollar cost average. It also helped me to not frantically check on my portfolio every now and then, knowing that I have the capital to prevent margin call. Even if I lose all the money in stocks, part of it is still in cash (for future investment if there’s good stocks or dollar cost averaging) this allows me to have a peace of mind as I know I won’t be losing all of my money.
Stocks are for long term and investing a lump sum can bring quick cash but also increase the risk. Right now I learned how to manage risk and also allowing myself to hold stocks for long periods of time. I believe it’s personal risk and investment preference so i believe everyone has their own way of investing (market timing, lump sum, dollar cost averaging, etc). I hope I have shared some insights and also to remind myself of the things I learn and I hope moomoo will continue to provide good investment experience for us. Wishing everyone Merry Xmas and looking forward to 2022!
$D05.SG$ $Roundhill Ball Metaverse ETF.US$ $AAPL.US$
First of all, I recalled that I had a dilemma - buy at all time high if not it will go higher and never come back down OR wait till it drops. It’s scary to see the price increasing higher and higher. I asked myself “do I buy now when it’s all time high or wait and buy when the price drops?” I waited only to see it increased 😂 and I hurried to enter the market to buy only to see it dropped and dropped further 🥲
One other mistake I made was not a very smart decision to buy shares of a single company with a lump sum and lastly, the mistake was to invest ALL my capital in my portfolio.
What’s wrong with the mistake above and what have I learned is that, firstly, I learned to ONLY buy what I can afford. When we see the price at all time high, we all hope for a discount but it can go either way so i have decided to BUY only if I can AFFORD to LOSE. Of course, I have to do homework to find out if it’s a good company that I can invest in for a long term.👍
Secondly, investing with a lump sum with all capital made me realise that I do not have enough cash to buy when the price drops for dollar cost averaging and i realised I have to keep checking on my account balance because I fear that I might blow my account.
So what I did was that I decided to sell one of the stocks that takes up a greater portion of my portfolio. And before I decide to sell, I was hoping that it will go up to breakeven. However it didn’t and I sell at a greater loss. Good news is that I was still able to preserve most of it. 🥲
This investment experience allows me to realise the importance of patience, value and risk management. I learned that the guts to selling stock (that is either going to harm your capital or losses its value) at a loss is also a must-have in order to prevent the losses from snowballing.
When I first started out, I focused on growth stocks. Now with the extra capital from what I sold as mentioned above, I invest part of it into SG dividend stocks, with the rest as back up capital. This allows me to not worry so much when the market crashes as I have the capital to dollar cost average. It also helped me to not frantically check on my portfolio every now and then, knowing that I have the capital to prevent margin call. Even if I lose all the money in stocks, part of it is still in cash (for future investment if there’s good stocks or dollar cost averaging) this allows me to have a peace of mind as I know I won’t be losing all of my money.
Stocks are for long term and investing a lump sum can bring quick cash but also increase the risk. Right now I learned how to manage risk and also allowing myself to hold stocks for long periods of time. I believe it’s personal risk and investment preference so i believe everyone has their own way of investing (market timing, lump sum, dollar cost averaging, etc). I hope I have shared some insights and also to remind myself of the things I learn and I hope moomoo will continue to provide good investment experience for us. Wishing everyone Merry Xmas and looking forward to 2022!
$D05.SG$ $Roundhill Ball Metaverse ETF.US$ $AAPL.US$
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$AAPL.US$ stock closed up 3.1% on Tuesday as other stocks tumbled on concerns of the new omicron Covid variant, showing investors see the company as a safe haven during market uncertainty.
The $.DJI.US$dropped 651 points, the tech-heavy $.IXIC.US$fell 1.6% and the $.SPX.US$ was down about 1.9% on Tuesday after Federal Reserve Chairman Jerome Powell said the Fed will discuss speeding up the bond-buying taper during its December meeting.
Since the company has prodigious cash flow, allowing it to endure any slowdowns in the economy and take advantage of falling prices.
But there's no perfect company. The biggest criticism of Apple for the last five years is no new products. It's stock price has stuck in the same place for a while when others are going up. Maybe the crisis is the turning point for Apple.
Do you have faith in the company?
What percentage does apple take on your portfolio?
Source:
Why Apple was the only tech stock that went up on Tuesday
The $.DJI.US$dropped 651 points, the tech-heavy $.IXIC.US$fell 1.6% and the $.SPX.US$ was down about 1.9% on Tuesday after Federal Reserve Chairman Jerome Powell said the Fed will discuss speeding up the bond-buying taper during its December meeting.
Since the company has prodigious cash flow, allowing it to endure any slowdowns in the economy and take advantage of falling prices.
But there's no perfect company. The biggest criticism of Apple for the last five years is no new products. It's stock price has stuck in the same place for a while when others are going up. Maybe the crisis is the turning point for Apple.
Do you have faith in the company?
What percentage does apple take on your portfolio?
Source:
Why Apple was the only tech stock that went up on Tuesday
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Hong Kong stocks are weak and there is a high risk of a big fall, and US equities looked like a good rebound last night, but there is an opportunity to hide the killer behind it as SME funds continue to outflow substantially $TENCENT.HK$ $BABA-SW.HK$ $TSLA.US$ $GOOGL.US$ $MSFT.US$ $AAPL.US$ $MRNA.US$
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$AAPL.US$ needs to focus on expanding their streaming operation much like what $T.US$ is doing. AAPL vehicles may or may not happen and quite frankly who cares? I believe AAPL in 2022 will make a huge push towards streaming and that’s where the big news will be focused on. Would be interesting if they went at $VICA.US$ or $LGF.A.US$
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