This page has been archived and commenting is disabled.
Get Ready to Load the Boat With Tech Stocks
There is one sector that hedge funds have an absolute laser focus on in this melt down and that is technology stocks. This is where they will be pouncing at the first sign of an upturn, like a famished tiger.
Some of the highest quality names have had the biggest falls, and they are now flaunting dividend yields greater than the 3.1% found on 10 year Treasury bonds. Look at Intel (INTC), which at $20 is selling at a paltry 11 times earnings and a 3% dividend yield, and generates the bulk of its sales in the highest growth sectors of the global economy.
After the dotcom bust of 2000, these bad boys spent nearly a decade in the penalty box, shunned by the investing world as the poster boys for wild excess. Think Robert Downey, Jr. on steroids. During this time, cash balances doubled, free cash flows soared, outstanding shares shrank, and multiples fell to a tenth of their bubblicious peaks.
I started recommending this group at the absolute bottom of the market last March (click here for the call at http://www.madhedgefundtrader.com/March_2__2009.html ), and it was no surprise to me when they outperformed almost every sector on the upside. With 60%-80% of their earnings coming from abroad, primarily Asia, I saw them really as foreign stocks wearing cowboy hats, pearl snap buttoned shirts, and Ray Ban aviator sunglasses. They did not need banks, as they are almost entirely self financed, immunizing them from the credit crunch. They avoided many of the management errors that torpedoed so many other US firms, like derivatives books, leveraged real estate exposure, and LBO debt.
While their American customers were getting poorer, hundreds of millions more overseas were getting richer. The industry represents the last, best hope that America has for competing globally, as it is our only means of staying on top of the international value added chain. It seems that in addition to bulk commodities like corn, wheat, soybeans, coal, timber, aircraft, weapons, and movies, tech companies are among the few that make things foreigners want to buy.
The lessons of the bubble made them ultra conservative in their capital spending, which will lead to product shortages and much higher prices in any recovery. Memory, for example, has seen no capex at all for three years. They are surfing the wave of innovation, and will cash in big time from the mobile computing revolution, cloud computing, and the virtualization of data centers.
During the last tech bubble, the industry did not have the global market that it does today. Now, demand from the rising emerging market middle class is kicking in, as it is for commodities. The 13 month tech rally we saw from the 2009 lows could just be the down payment of a decade long bull market in these stocks, which will end with another bubble. When John Chambers, a first class manager, discussed Cisco’s (CSCO) outlook after announcing blowout Q4 earnings, he was so effusive he sounded like he was on ecstasy.
Take a look at IBM (IBM), Juniper Networks (JNPR), JDS Uniphase (JDSU), Sandisk (SNDK), Micron Technology (MU), and Oracle (ORCL). Long dated call spreads in any of these make sense on a decent dip. You can also look at the Technology Select Sector SPDR (XLK), the PowerShares QQQ (QQQQ), or the leveraged ProShares Ultra Technology ( ROM).
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on the “Today’s Radio Show” menu tab on the left on my home page.
- advertisements -
Whats the thought on tech stocks today?? Ridiculous!!! There is not a stock on the board i would own..Analysts are all a bunch of flag waving losers that really have no clue..Hope mr madhedgefundtrader did not load the bus up yet!!!
The corporate insiders working at our country's big Tech powerhouses noodled on their own stakes in the companies they run and made a decision in May: time to sell.
Alan Newman, publisher of the Crosscurrents newsletter, recently checked in on the top issues comprising the PowerShares QQQ(QQQQ), an ETF that tracks the Nasdaq 100. Holdings in the exchange-traded fund include Apple (AAPL), Microsoft (MSFT),Google (GOOG), Oracle (ORCL), and Intel (INTC).
The last time Newman checked was back in January 2009, he says, and the NASDAQ was already well on the way toward the bottom, down 41% from the 2007 highs. (Newman only monitored the top eight issues since two of the top 10 -- TevaPharmaceutical (TEVA) and Research in Motion (RIMM) -- are foreign companies and insider data aren't available.) See also,Tech Giants Bet Big on Enterprise Computing.
At that point, there were a grand total of 250 sellers against four buyers, a ratio of 62.5 to 1. There were 47.7 million shares sold and 97,000 shares bought, a ratio of 490-1.
Okay, so what's it like now?
Worse.
In Newman's May 10 tally, there were 231 sellers and only three buyers -- a ratio of 77 to 1. Shares sold were 59.8 million versus only 15,200 purchased, a sell-buy ratio of 3933 to 1.
How can there be unequal numbers of shares bought/sold?
It's more appropriate to load the boat with enough provisions for a month and keep it ready just in case you need to get,the fukc out of dodge.
40' Sailboat, Primary Residence
Sailing Experience, Offshore
Peace of mind to be able to get away. Priceless
Watch out for them thar pirates.
IDF ?
I puzzle over who MHFT thinks he's talking to. I doubt there is a single commenter here who doesn't know the market is a complete fraud that is about to crash. So why is he wasting his keystrokes? What does it accomplish?
BTW, MHFT, I notice you're posting the same stuff in the WSJ comments sections. Save your keystrokes there, too. The last bull disappeared from that comments forum about a month ago.
I think tech will totally blow in an environment of global stagnation. I think tech will be the worst performer in an environment of global hyper inflation. Odds are we don't hit the sweet spot you are looking for. I think you made the right bet in 08, but we fumbled on true reform. There was no follow through. So IMO, all bets are off.
If the Dow is truly headed for 6K it will drag tech right down with it. Besides, what happens to earnings for these techbeasts with a strong dollar?
what happens to their earnings when they can't lay off any more employees?
I'm confused by this post. Who here sees a recovery in the short or mid-term? If you do, can I borrow your rose-colored-glasses?
et tu, madhedgefundtrader?
tech....YHGTBKM
DIVX is crushing today! I really like Cisco, I think that they will wire 'Merca up nice and tight during the next two years. I also like Netflix, due to their business model mostly, but as I believe that the Hollywood Futures Index, if licensed, will be the next bubble. I think stocks like Apple, Intel, and Microsoft will do great for their technology, but everyone of these corporations will have skin in the entertainment sector too. I think that stocks like Disney and Google will do great in this paradigm.
"The industry represents the last, best hope that America has for competing globally, as it is our only means of staying on top of the international value added chain."
BULLSHIT. They give us so much hope as they ship every job possible overseas?
When will you fucktarded Wall Street types realize that a profitable "American" company means nothing to America or it's people.
And don't give me the line "you can buy thier stock". Yeah, with what money?
I can't even get an interview at Intel despite a computer science degree.
Wake up moron!!!!
I'm not surprised that a CS major can't get an interview at Intel. After all, Intel runs contests in the hope that software designers will figure out how to do parallel programming on their execrable shared-memory multiprocessor systems. These systems are a case of the hardware crowd creating no end of artificial complexity for the software crowd, as if programming wasn't hard enough already.
LEO, is that you? Disclosure: Short AAPL. Yes, really. Big time.
Never said short AAPL, but I preferred other names at the time. AAPL is on fire, and good for them. Not touching it now.
Umm, good call, I recommended these and other tech stocks on January 1st, 2009:
http://pensionpulse.blogspot.com/2009/01/outlook-2009-post-deleveraging-blues.html
Of all of these the only one I could, maybe, consider putting money in is SNDK.
There will be lotsa time to get into any of the other ones mentioned. In fact, time may be coming up to short 'em.
What kind of a plug is this?
Its not about earnings right now,Its not about p/e ratios right now. It is about worldwide financial armageddon that will bring the finacial system to crash and ultimatly bring down everything with it. There is only so long that you can print money and think it will continue to work..Gold/Silver be long and strong because there is nothing else right now to own..The trade is working and will continue to
Good call with RIG dip shit...
Tell me about it. Stopped out in a day and a half. It is fun mashing the refresh button though, wishing the @%&$%^ to drop below where it stopped out. I know it must be fun because I keep doing it. I mean, if it brings no benefit, and it's not fun, and yet I keep doing it, that means I'm insane.
There's soooooo much wrong to your post.
1st. If you went to his site, althought the post that posted on zerhedge was dated Jun 1st, the identical post on madhedgefundtrader was datedMay 28th and the chart referenced is from May 26th!
2nd Meaning, that on the date posted here, he was already down some 5-7%
3rd He was advising averaging down, what stop do you use on that goal?
4th "averaging down?!!" Sooooo 2008ish
5th Myself, I prefer to average up, it's much saner.
6th-19th....
Hey, is there anyway to subscribe to the newpets.com IPO? I hear GS is going to blow the doors off this time, and some lucky bastards are gonna be rich! GM -- oh man -- GM caught a heckuva deal from Mazda, they bought the rights to manufacture wanker engines and GM shares should be headed for a lunar landing. Yessiree.
"...decade long bull market..." ?? Please.
I'm starting to get apprehensive about buying green bananas.
hilarious about the bananas - totally agree, tech already popped - this smells of self serving yet again
Get ready to load the boat with tech stocks = Get ready to be bent over the desk.
But hey, whatever you're into Madhedgefundtrader
Oh... and love the Zero Hedge 'Post-vertisement'
One would guess then that you see no merit in Prechter's prediction of global armageddon, the apocalypse, or even mini-skirts on an elevator that give us a money shot, n'est ce que pas?
Hahahahahahaaha!!! Superb.
Love the shameless plugs, though.
Shoot -
Japanese companies have values under book, and cash on the balance sheets that is more than the market cap. Yet their market is still down 70% in 20 years.
Maybe madhedgefund guy should go and buy Japan instead?
I would actually prefer to short the tech sector
Or...
"Get Ready to Go Down with the Sinking Ship"
There is a legitimate reason the valuations are down.
There is no interest in tech stocks when the global economy is imploding because capacity goes up and less CAPEX will be shelled out well into the future.
Owners will make due with what they have!
However, if I were to need action for action's sake (e.g., say I were a degenerate gambler), I would be short tech stocks.
GOOG to $1500 and a modest 300 P/E by 2011. I didn't know Cramer had a pseudonym profile at ZH