Significance for investors


Significance for investors

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Some market opponents argue that once a stock becomes very popular with investors, it will likely fall. The fattest of active mutual fund managers, in descending order, is Visa Inc. (V), Alibaba Group Holding Ltd. (BABA), parent of Google Alphabet Inc. (GOOGL), Microsoft Corp. (MSFT) and Mastercard. Inch. (MA), as reported by Barron's, according to a recent poll by UBS. Performance in 2019 is presented in the table below.

5 Most Overweight Stock Voters Position

(YTD earnings as of April 25, 2019)

Visas, +22.3%

Alibaba, +37.1%

Alphabet, +21.3%

Microsoft, +27.7%

Master Card, +29.8%

S&P 500 Index, +16.7%

Significance for investors

Significance for investors

Heavy purchases can lead to an increase in the stock's valuation. Then, because many investment managers follow a herd mentality, selling can begin when these stocks are good and lower in price. In a 2016 report cited by Baron, UBS warned: "When this trade hits a tipping point or an external shock occurs, we expect prices to change dramatically as investors accumulate their risk one by one."

After closing on April 24, Visa and Microsoft also announced their first-quarter earnings for 2019, which easily topped analyst estimates, but Visa was down 0.3% and Microsoft was up 3.3% on April 25. As mentioned above, these stocks can fall suddenly. 

UBS also disclosed the shareholder with the lowest weight among active directors. This is Apple Inc., again in descending order. (AAPL), Nestle SA (NSRGY), Exxon Mobil Corp. (XOM), Ltd. Tencent Holdings. (TCEHY) and Taiwan Semiconductor Manufacturing Co. Ltd. (TSM). Their performances to date are listed below.

5 Shareholders with the Lowest Weight

(YTD earnings as of April 25, 2019)

Apples, +30.7%

Nestle, +20.9%

Exxon Mobil, +21.9%

Tencent, +23.3%

Taiwan Semiconductor, +20.5%

S&P 500 Index, +16.7%

Nearly 50% of the high-tech Nasdaq 100 index growth in April was backed by just four mega-top tech stocks. According to Bloomberg, these are Apple, Inc. (AMZN), Microsoft and Facebook Inc. (FB).

Optimists say the asset crowd among investment managers reflects high confidence. David Costin, chief equity strategist at Goldman Sachs US, expressed that view, according to another Bloomberg report. Moreover, FANG shares are expected to grow with an average profit of 15% in 2019, which is almost three times higher than the S&P 500, according to data from Goldman Sachs quoted by Bloomberg.

According to Bloomberg, the equity equilibrium portfolio, favored by mutual funds and hedge fund managers and rebalanced monthly, has surpassed the S&P 500 by about 5 percentage points per year since 2013. 

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However, when the market changes, you have an equal and opposite reaction, because everyone goes to the exit at the same time. Hillary, CEO and portfolio manager of Denver Robaix Capital Bloomberg, said. In market sales in the fourth quarter of 2018, it is not uncommon to find stocks that lose 20%, 30% or more in value in the process.

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