If the SPAC boom minting new billionaires every day and the NASDAQ raging to new highs almost daily weren't enough to give 2020 a certain "1999 vibe", perhaps some additional stunning statistics from the Wall Street Journal will.
In a recent article the Journal published detailing stocks posting astonishing rallies off lows this year (thanks Powell and Kashkari), it was revealed that the number of stocks that have risen 400% or more in the first nine months of this year is the most since the year 2000.
The study looked at companies that were at least $100 million to start the year. This year's winners were replete with technology and biotech companies, as investors flocked to both sectors as a response to the coronavirus pandemic.
Outliers like Overstock have risen 956% so far this year. Names like Tesla and Zoom are both up 413% and 591%, respectively.
The Journal says that the run in stock prices was one that "few saw coming", however the Fed's early intervention during the beginning of the pandemic made it clear - at least to those paying attention - that the Central Bank's only policy was to save the stock market at all costs, sacrificing it on the altar of price discovery. And thus, here we are.
Justin White, a portfolio manager at T. Rowe Price, said: “The rate at which momentum and enthusiasm and exuberance took hold over the summer…it hit a fever pitch that I have not seen in the five years that I’ve been managing my fund.”
And while the Journal is also quick to attribute the gains to individual investors, we pointed out weeks ago that a large catalyst behind a recent rally in tech had to do with nothing more than market manipulation, through the purchase of options, by Softbank.
That gamma squeeze disproportionately affected the NASDAQ, with more than 60 stocks in the index rising at least 400% at their peak in 2020. More than 1,000 of the index's 2,500 stocks suffered declines of at least 50% at their low points, as well.
In addition to Apple and Tesla engaging in stock splits, IPO and SPAC enthusiasm has also continued to fuel what is left of actual investor sentiment heading into the fall. Names like Snowflake and Unity Software have been widely talked about names and relative successes, post-IPO. Compass Pathways, a biotech company focusing on psilopsybin, also had a successful IPO this year, as we pointed out weeks ago.
White had grappled with the reality of buying Zoom back in March after it had started to rally: “I kept a pretty small position because I didn’t want to make a heroic bet at what could have been the top. In hindsight, the stock was actually pretty cheap at $200.”
But, as White learned, reality doesn't seem to matter anymore. David Malmgren, senior portfolio manager at FBB Capital Partners, recalled the pushback he received while buying Tesla at $800 (pre-split) earlier this year. “The managing director of the firm came to me and said: ‘Seriously, we’re buying Tesla at $800?’ You’re buying at the highs…it takes courage.”
Courage is one word for it...