The Great Tech Rotation
Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!
This week, we’re talking about:
The Great Tech Rotation
This week, Taco Tuesday had the market ripping.
And do you hear that?
It’s the winds of change…
Take a look at what is up and what is down from the past week:
Damn. Did any geniuses out there tell you to get in on Broadcom, AVGO, recently?
The stock market can be simple sometimes. Usually it boils down to two things:
Projected earnings growth and predictability
Usually, the companies growing their earnings really fast or having predictable business models trade at a premium.
Take Costco, for example. Great business. Great customer retention. Suppliers love them. Communities love them. Customers love them. Sell products people like cheaper than competitors. Tried and true.
EPS growth?
Solid but not amazing.
And the stock price?
At a big-time premium.
A 44 projected P/E ratio for 2027 is expensive!
Why are people paying so much?
Because it’s one of the most predictable businesses out there. Close your eyes and imagine thirty years from now. You’ll still be getting milk and eggs and a $1.50 hot dog from Costco.
The market is spooky out there! Especially with companies dumping tons of money into the dreaded AI. Gasp!
Investors have wanted the safety of the Costcos and other slower-growing defensive stocks.
Even with the boost this week, take a look at the valuations of NVDA, AVGO, and META.
A 23, 21, 18 projected P/E ratio for 2027 is cheap!
And compare that to their growth:
Usually, big growth = big premium, but that hasn’t been the case so far this year.
Was this week the turning point?
Are investors getting back in on the big growth machines?
Are we witnessing the great tech rotation?
What will Melania Trump say next?
Only time will tell.
Final Thought
“I call on Congress to provide the women who have been victimized by Epstein with a public hearing specifically centered around the survivors. Give these victims their opportunity to testify under oath in front of Congress, with the power of sworn testimony.” – Melania Trump
Yeah, we agree, Mel. Tell your husband.
