The Nasdaq 100 index made a new multiy-year high this week, cleanly breaking above the 3,150 level on Monday. The index only traded at these levels during the go-go days of 2000:
Of course, the composition of the index today is much different than 13 years ago. What’s driving this year’s performance? The best performers in 2013 are the well known high fliers:
- TSLA – Up 391% in 2013.
- NFLX – Up 237% in 2013 (and a new all-time high yesterday).
- MU – Up 156% in 2013.
- GMCR – Up 103% in 2013.
- VRTX – Up 94% in 2013.
These stories have for the most part been well documented. What’s interesting is that there are many names in the next 10 that are hardly mentioned or followed:
- CELG – Up 89% in 2013.
- GILD – Up 71% in 2013.
- CHTR – Up 67% in 2013.
- FB – Up 64% in 2013.
- ATVI – Up 63% in 2013.
- REGN – Up 62% in 2013.
- PCLN – Up 57% in 2013.
- WDC – Up 57% in 2013.
- BIIB – Up 56% in 2013.
- VIAB – Up 55% in 2013.
In fact, most of the large cap tech names that dominate the S&P top 100 (AAPL, MSFT, GOOG, INTC, ORCL, QCOM, CSCO, AMZN, EBAY, etc.) are not anywhere close to leading tech winners in 2013. The best performing sector in the Nasdaq 100 (and really, in the entire market) has been the biotech sector, with VRTX, CELG, GILD, REGN, and BIIB all making the top 15 list for the index.
Simply saying that technology is leading this market then is mistaking the evidence. The Nasdaq 100 is up about 20% on the year, but many of the largest technology stocks have actually been a drag on the index. The XLK ETF, while impacted by its 15% weight to AAPL, is still illustrative of the weakness in large cap tech despite the strength of the Nasdaq names. Here is the XLK / SPY ratio since the start of the bull market:
Among large caps, technology has been a loser. But as long as you’re not one of the large cap losers, this passing of the baton is a story of rejuvenation and renewal. The best performing stocks in the Nasdaq 100 are generally pioneers in their space (with the exception of MU, for which I’m open to opinions on its strength in 2013, since it looks like grossly misplaced optimism to me). It’s part and parcel of the creative destruction that business professors love to preach.
As we head into the final few months of 2013, I will be watching the performance of these leaders to get a sense of how portfolio managers are shifting their funds in anticipation of a clean slate for 2014. The trend in September has so far been to continue to push the winners. But the Nasdaq’s strength today largely rests on the shoulders of unsung heroes rather than the bread and butter tech stocks of days gone by.