Those with a lot of money in tech stocks may be starting to breathe a sigh of relief. After a rough period to start the year. The last few weeks has been quite positive for tech, so the worst may be behind us, right? The answer is that it may not be, according to some analysts. There are two huge trends (and one macro factor) that look likely to weigh on the sector for the next year. Firstly, three of the very largest stocks—Facebook, Apple, and Google, have gotten to the point in size where their growth is going to start inevitably slowing, which means the narrative around them will change. Additionally, the success of the vaccine rollout is increasingly, which means a reversal to pre-COVID norms seems likely. Tech stocks are also quite rate sensitive, which gives them a lot of “Fed risk”.
FINSUM: While it is hard to argue with the interest rate risk, we cannot get on board with the other two narratives. Everyone knows FAANG stocks are huge, the growth story is no secret. More generally though, we just don’t buy into the narrative that these stocks will suffer from the “reopening”. Consumer habits in many areas (e.g. grocery shopping and increased food delivery) have changed and that will continue to allow big tech stocks to grab market share and grow. Just ask your grown children and friends how they feel about going back to the grocery store….
The infrastructure bill is not only making waves in Washington, but also on stock exchanges. The bill is going to send many stocks surging, but here are six names that look likely to do very well if the current plan passes, with a particular focus on semiconductors. One little known detail is that the Biden plan earmarks $50 bn for the US semiconductor industry and an extra ~$175 bn for electric vehicles, which will also help semiconductors. Accordingly, check out these stocks, all of which seem like good candidates for appreciation: Vishay Intertechnology (VSH), Applied Materials (AMAT), Macom Technology Solutions Holdings (MTSI), Micron Technology (MU), Analog Devices (ADI), Maxim Integrated (MXIM).
FINSUM: The semiconductor industry has been lobbying for this to help increase its eroding market share versus China and it seems like the Biden plan will deliver.