Regardless of whether you think the bull market that started in Q1 of 2009 is over or not, one thing is fairly certain, that the breadth of the rally in large cap U.S. stocks petered out more than a year ago, and fewer and fewer stocks have been responsible for the S&P 500 and the Nasdaq Composites’s relative out-performance to small caps and to foreign equity markets. And let’s not ignore the massive out-performance of defensive sectors with high dividend yields in 2016 like Utilities, Consumer Staples and Telcos.
Two stocks that have benefited from the ever-narrowing breadth and investor sentiment are Facebook (FB) and Google (GOOGL). These companies are the clear winners of the largest secular shift in advertising we’ve seen since TV and have been rewarded as they are amongst only a handful of stocks doing well so far in 2016.
But the last couple years has seen the inflation and implosion of other mini-bubbles in other sub-sectors of technology, where investors had thought there were similar secular shifts (like migration to online mobile ads) that favored these stocks. Some recent examples.
3D Priting, DDD & SSYS are both down nearly 90% from their 5 year, all time highs:
Cyber Security stocks like FireEye (FEYE) down 85% from its all time highs, and both Cyberark (CYBR) down 28% and Fortinet (FTNT) down 42% from their 52 week highs:
PC & Smartphone cpu, memory and storage chips, like Micron (MU), Sandisk (SNDK) & Seagate (STX), down 70%, 55%, Qualcomm (QCOM) down 48% and 35% (was 60% before recent takeover by Western Digital (WDC)) respectively from their 52 week highs:
Wearables, recent IPOs like FitBit (FIT) and GoPro (GPRO) have lost 70% and 90% from their all time highs respectively:
Software as a Service/ CRM stocks, the grand-daddy of em all Salesforce.com (CRM), is down a modest 22% from its recent highs, but ServiceNow (NOW) and Workday (WDAY) are both down 37% and 55% respectively from their all time highs:
Internet Services/ Social Media, Twitter (TWTR) down 78% from its all time highs, Pandora (P) down 80% from its all time highs, Zillow (Z) down about 50% from its all time highs, and that includes last year’s acquisition of their main competitor Trulia, and Yelp (YELP) down 80% from its all time highs and Yahoo (YHOO) down 45%:
Chinese Internet stocks, topped out shortly after Alibaba’s (BABA) Sept 2014 IPO hype subsided. BABA is now down about 46% from its all time highs, while Chinese search giant Baidu (BIDU) is down nearly 40% from its all time and 52 week highs:
And of course Biotech, with the IBB, the Nasdaq Bitotech etf down 35% from its 52 week and all time highs and the XBI, the S&P Biotech etf down 46% from its 52 week and all time high:
Almost every sub-sector in tech that has seen unusually bullish sentiment has seen the lesser players fall by the wayside, far worse than that of the weakness of the broader market and the leadership from the all time highs. Sentiment bubbles have inflated and burst in many areas of tech where at one point in the not to distant future, investors were convinced that these stocks were special, that some sort of secular shift was upon us, and that mundane things like eye-popping valuation and overly positive sentiment would not outweigh fundamentals.
So I’ll leave you with this, FB and GOOGL are clearly benefiting from a similar sentiment bubble about their opportunity in online mobile ads, but also from the fact that there are few spots in innovative tech of where to put cash to work. Something has to give here, there has to be either a reversion trade, or merely that FB and GOOGL will also fall by the wayside and play a little catch up. A stock market can not rest on the strength of a handful of mega-cap special stocks and the money piling into GOOGL and FB probably has a lot more to do with what’s going on in other stocks than what’s actually happening in online and mobile advertising given the current economic backdrop.
Game’s the same, just got more fierce – Cheese from The Wire