Historically, when investors turn to dotcom stocks (i.e. the stocks issued by tech companies), that means that the entire stock market is getting ready for another rally. Nasdaq Composite Index grew by 8.6% in September 2012-February 2013. This was one of the strongest rallies. Nasdaq significantly outperformed S&P 500 during the same period (+2.8%). The 6% gap between those indices has reached the highest level since 2012.
Nasdaq was driven by the same bullish drivers that drove the entire Us stock market - another round QE, positive quarterly reports and lower economic risks.
However, due to higher demand for computers and mobile devices in emerging markets, tech stocks accelerated their rally, thereby outperforming the rest of the stock market.
What are the near-term prospects of the US stock market in general and its tech sector in particular? Let’s ponder on this question together with experts.
Nasdaq Dynamics
The extra cash generated by the Fed’s quantitative easing and poured into the US financial sector seems to have increased to investors’ interest in high-yield risky assets (tech stocks are some of them).
According to , more and more market participants assume that the Fed’s QE has cleared the way for another Nasdaq rally. On March 11th, Nasdaq reached the highest level since September 2012 - 3252,87:
Experts assume that most tech stocks remain attractive in terms of investment potential. The P/E ratio of most stocks that belong to S&P 500’s tech sector is equal to 13.9m which is not far from 12.7 shown by S&P 500 in general. Moreover, the tech sector usually shows the highest P/E ratio among all the 10 sectors of S&P. However, at this point it is only number 6. The telecommunications and consumer sector currently have highest P/E ratios - 14.7and 14.3 correspondingly.
It turns out that the current P/E ratio of the tech sector is below the one seen in 2003. Still, the recent tech rally was uneven because the outstanding performance was reached mainly due to such heavyweights as Apple and Google - 20.7% and 4.68% correspondingly.
Expert Opinion on Internet Information Providers -Yahoo!,Google, Yandex and Mail.Ru
For reference sake, over the last quarter, experts have been bullish on Internet Information Providers - Yahoo!,Google,YandexandMail.Ru.
According to Igor Vasev, an expert in stock markets form , say that the stocks of Yahoo! and Google are still in the purchase zone. However, if there are major market retracements, those stocks may enter the sell zone.
If to have a look at the dynamics of the mentioned group shown since mid 2011, we can see that Yahoo! and Google are the only stocks that have actually managed to outperform NASDAQ and are still sowing confident growth.
Moreover, those who had bought the equal shares of these 4 stocks in mid 2011, would now benefit 7.6%. Reinvesting would make it possible to earn up to 53% during the reporting period.
It is recommended to expand the holding of Google’s stock while it is better to reduce exposure in the markets of Yandex and Mail.Ru:
One more fact speaks in favor of Google’s stock. It managed to recover from a 2-month downtrend seen in the fall of 2011. At the same time, Apple’s stock, which used to be the frontrunner, continues its 5-month downtrend.
Nevertheless, nobody of those who remember the 1990s and the 2000s can say that another bubble is inflating in the market. Those times are gone. Today’s representatives of the tech sector have solid foundation and real income.
