The Curse of the Commentator
Find out what might lie ahead for the Nasdaq
Three weeks ago, I wrote about the differences between Active and Passive investment. To boost the argument for Active, I flagged how the Top 5 most talked about tech stocks had outperformed the benchmark Nasdaq-100 this current year by almost 150%. At that stage, the likes of Google and Amazon were flying high, with both of them approaching the fabled $1,000 per share mark and up nearly a third in 2017. I predicted that the shares would spend a matter of moments above $1,000 before some healthy profit-taking came to bear.
For a couple of trading weeks, not only did both stocks duly breach the four-figure mark and they stayed up in the 1000s seemingly contentedly.
Much like Abby Joseph Cohen of Goldman Sachs who talked of a 10,000 level on the Nasdaq as the tech bubble burst in 2000 (it ended the year at 2,300) or when Mark Nicholas, when chatting with legendary cricketer Shane Warne live on air, announced that the Australian David Warner (then on 97 not out) had never been out in the nineties, proceeded to be dismissed whilst delivering that very fact, my call on Google & Amazon seemed to have been cursed.
Yet, on Friday 9th June and Monday 12th June, something happened which left market pundits, experts and novices alike scratching their heads. On seemingly no news, the most celebrated tech stocks took a sudden pasting over the two trading sessions.
Amazon — $1,010 → $948. Down 6.1%
Google — $1,004 → $945. Down 5.9%
Facebook — $155 → $145. Down 6.5%
Netflix — $165 → $150. Down 9.1%
Apple — $155 → $143. Down 7.7%
Top 5 Average Return Down 7.1%
Nvidia — $168 → $144 Down 14.3%
This sudden unexpected decline was not mirrored within the more mainstream US stock indices, the Dow Jones Industrial 30 and the S&P500. They looked across at their flashy cousin, the Nasdaq-100, that had been dramatically out-performing them in 2017 and simply ignored the torrent of market sell orders to hit Apple, Nvidia, Netflix etc. Indeed, almost nonchalantly, the Dow Jones drifted up to higher lifetime highs as last week progressed.
It is interesting to note how the six most-talked about tech stocks fared over the rest of last week:
Amazon — $948 → $987. Up 4.1%
Google — $945 → $959. Up 1.5%
Facebook — $145 → $151. Up 3.4%
Netflix — $150 → $165. Up 1.3%
Apple — $143 → $143. Unchanged
Top 5 Average Return Up 2.5%
Nvidia — $144 → $151 Up 4.9%
Their recovery post June 9/12th trading sessions implied them to be merely a blip in the long-term bullish trend and thus presented investors with an opportunity to pick up some household names a handful of percentage points from their lifetime highs. A lot of debate on Pelican last week revolved around whether those two dramatic days were simply a healthy degree of profit taking after their stellar starts to the year. The bulls believe that Amazon and their ilk will soon be cracking onto fresh lifetime highs. Indeed, their purchase of Whole Foods on Friday saw the shares nearly breach $1,000 again.
There is even chatter within the Pelican network that Jeff Bezos will soon hold the title of the World’s Richest Man, whose net worth is now ‘only’ $5 Billion behind Bill Gates, who leads the way with an incredible $89.3 Billion. The bears believe that the recent sudden volatility is a portent of further, steeper and more dramatic declines similar to when the Nasdaq-100 rallied sharply in late 1999 until March 2000, only to fall 10% in a matter of days, then rally 15% over a couple of weeks before it then fell by a staggering 50% in the ensuing 9 months.
Whether the bulls or the bears are correct, there is no doubt that Pelican is an excellent trading platform within which to engage in debates such as how much higher Amazon’s shares go or which one of Jeff, Mark or Warren will take Bill’s mantle.
Only within the Pelican network can you build your own discussion groups or seek out other groups where you can chat, see others’ positions, copy or even oppose / challenge trades, all within a unique FCA-regulated environment.
Start your own debates today, whether amongst your friends, like-minded investors you discover within the Pelican network or with professional traders!