All posts in category: Technology (22)

Party Like It’s 1999

Friday, August 7th, 2020

Time to take profits in US Tech

The US Tech sector has just flashed an important warning signal. Our recommended weighting has just dropped below its 52-week moving average. This has happened seven times in the last 25 years and the result is always a significant reduction in exposure. Six times out of seven, the sector has not bottomed until it was deep in underweight territory.

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One Disease; Three Themes

Friday, April 3rd, 2020

Consensus is looking for mean reversion in the wrong place

Three interesting ideas emerge from our regular reports. First, the volatility shock will almost certainly be as bad as 2008. Second, we believe that a long Technology /short Energy trade will have a positive pay-off no matter whether equity markets rise or fall. Third, our models are increasing exposure to EM Equities. We recognise this is a contrarian trade, but it is well-supported by our process and doesn’t depend on one or two countries.

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Chairman Mao is Coming to Dinner

Friday, February 7th, 2020

Or the fat lady is about to sing (choose your own metaphor)

Apple and Microsoft both look significantly overbought relative to US equities. Other US stocks with similar scores have underperformed by about 15% over the next three months. If this happens to the two largest stocks in the index, US equities will probably fall.

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Barbell

Thursday, April 4th, 2019

Overweight defensives and high growth. Ignore the rest.

Equity investors have decided to revisit a strategy first utilised during the secular stagnation debate of 2015 and early 2016. In the US and Europe, they are buying low beta defensives in case there is a recession and paying a premium for stocks with strong secular growth, in case there isn’t. There is very little active weight in the rest of their portfolios. It’s a Barbell strategy, which works while we wait for clarity from the US results season.

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All Good Things Come to an End

Wednesday, October 17th, 2018

US Technology sector downgraded

The US Tech sector may bounce if Q3 earnings are good, but we think our downgrade is part of an important trend, not just a blip. In other regions, the sector has been downgraded to underweight within a few weeks of being downgraded to neutral. At the stock level, we have already cut most of our long positions between June and October and expect to cut some more in the near future.

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The Endowment Effect

Wednesday, June 27th, 2018

Do US Tech companies over-value their own shares?

We are in the middle of the pre-announcement period when US companies suspend their buyback programmes, most notably the Tech sector. Our models suggest that they may have recently started to value their own prospects more highly than external investors

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Final Thoughts & First Decisions

Wednesday, December 13th, 2017

The agenda for January starts to take shape

It’s too late to make any significant adjustments to the portfolio this year, but there are several themes which may have matured sufficiently to be immediately actionable when markets restart in January. On the downside, we may have to cut exposure to China and to the Technology sector in the US, and globally. On the upside, there may be an opportunity in UK equities and certain defensive sectors like Staples and Telecom.

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The Days of Future Past

Wednesday, November 1st, 2017

China Tech is growing a bubble

We are not concerned about the Tech sector in the US. We are concerned about it everywhere, particularly in China. There are obvious parallels between the behaviour of the Chinese Technology sector now and the US in the run-up to the dot-com bubble. Valuation tends not to be helpful in these circumstances, but Harlyn’s approach, based on return per unit of risk, can be.

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A Bit Weird

Wednesday, June 21st, 2017

The Curious Link between Energy and Tech

The fate of the US Energy and Technology sectors may be linked together thanks to the simple mechanics of portfolio construction. Our data suggest that investors may be herded into two large positions relative to the benchmark: a big overweight in Tech and a big underweight in Energy. It will be difficult to reduce one without reducing the other. So a bout of profit-taking in Tech may lead to a bounce in the Energy sector. More importantly, a bounce in the oil price could cause the Tech sector to underperform.

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Bubble Territory: Official

Wednesday, May 31st, 2017

Worry about Chinese – not US – Tech

According to our metrics, the US Tech sector entered bubble territory two weeks ago. The only times it has had a higher score were in 1999 and 2000. But Tech bubbles can deflate gently, as was the case after September 2014. We are actually more concerned about the frenetic switch out of US Value into US Growth, and the runaway performance of the Chinese Tech sector over the last five years.

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