When I say strange, I say so from the perspective of good, bad and indifferent. Here are some examples. Please excuse me if the foregoing seems a bit too technical (but hey that’s what we get paid for).
Apple Seems to Have a Negative Beta
Let me first mention that Beta is the financial term for a stock’s (or portfolio or asset class) return relative to a market index. For our Growth Portfolio we use the S&P 500 (SPX) as the base index. For example, if Netflix (NFLX) has a Beta of 1.46. On average (the key word being average), NFLX has an expected move relate to the SPX of 1.46. So, over an extended period of time, if the SPX rises 10% then we expect NFLX to rise 14.6%. Of course, there are variations, but I am talking about expectations. Apple (AAPL) has a stated Beta of 1.20. However, recently I have noticed that when the SPX rises, AAPL falls and when the SPX falls, AAPL rises. This can either be incidental or there can be a genuine change in the characteristic of AAPL. It may, if my theory proves correct is that AAPL is beginning to transform from a Growth to a Value stock. In doing so, it may be decoupling its Beta to the SPX. In other words, it may no longer moving together. AAPL has declined 2.38% so far this year, whereas the SPX rose by 4.04% to a record high 6,129.58. Recall, that I saw a change in the characteristic of AAPL as I wrote back on October 19, 2023 in: Is the Shine Coming off Apple. Since then, we have whittled down our holdings in AAPL in favor of other growth stocks, such as Palantir (PLTR) which has proved to be a good trade-in.
Nvidia and Broadcom have Decoupled
Lately, when Nvidia (NVDA), the behemoth semiconductor company, rises, Broadcom (AVGO), another member of the “Trillion-dollar Market Capitalization Club” seems to fall. On other days the opposite seems to occur such that when AVGO rises; NVDA falls. This may be anecdotal or simply the impact of portfolio managers reallocating their relative holdings mix. After a spectacular two-year rise for both stocks we could expect a cooling off for one or both stocks. I don’t see a need to take any action before earnings reports for the individual companies. NVDA reports earnings next week, February 26 and Broadcom the week after on March 6. Those earnings results will weigh more heavily on both stocks. Though just yesterday, it was widely reported that Taiwan Semiconductor (TSM) and AVGO may be in a deal to carve up Intel (INTC) into two pieces. INTC rallied on the rumors, but the stock has smelled like a decaying fish for the longest time, and I would avoid. Whatever comes out in the wash, will likely benefit AVGO and TSM. I would note that AVGO has been a prescient acquirer of other companies in the past.
Is the Run in Meta Over?
Meta Platforms (META), the company formerly known as Facebook, broke a 20-day long winning streak, a record for the company. Is this the end of a long-term trend or just a pause? Wall Street analysts forecast a year-end price target of $762.74 for META, versus its closing price of $716.37. Here at LakeView Asset Management, we think the stock can rise higher to the range of $800-825. Hence, no need to fret, just be patient and perhaps add on the dips.
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Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView Asset Management, LLC was long AAPL, AVGO, META, NFLX, NVDA, PLTR & TSM, - although positions can change at any time. The mention of stocks are not recommendations and may not be suitable investments for your individual situation.
Scott Rothbort is the President & Founder of LakeView Asset Management, LLC, (LVAM) an investment advisor representative, specializing in high-net-worth private wealth management. LVAM is a separate entity of Osaic Advisory Services, LLC, a registered investment advisor.
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