The most recent accounting season has given major US tech stocks a boost, pushing their stocks to record highs. At Apple, the euphoria outweighed the better than expected quarterly figures. Nobody was bothered by the relocation of the new iPhone. Although the Google parent Alphabet and Facebook suffered massively from advertising losses, the social network was able to gain numerous new users during the pandemic. And Alphabet benefited from the cloud business and the YouTube channel, which grew disproportionately.
But the euphoria was greatest at Amazon. “Amazon is one of the biggest beneficiaries of the coronavirus pandemic,” says Carlo Alberto de Casa, chief analyst at British broker Activtrades. “The crisis gave the world’s largest online retailer a further surge in growth in many business areas. In addition to the booming online trade, the still growing cloud business with IT services and storage space in the network also contributed to this. With its AWS division, Amazon is also the world market leader here.
First alarm signals
But behind all the euphoria, the risks are increasing and the market is divided overall. “Although safe investment havens such as gold and federal bonds have recently been in high demand, the uncertainty on the stock market has decreased,” explains Marcus Landau, derivatives sales expert at DZ BANK. “Both the“ VDAX-New ”volatility barometer and the“ VIX ”volatility index for the US stock market have fallen to their lowest levels in recent months,” Landau continued.
As a result, hedges such as put warrants on the large US tech companies have become comparatively cheap, such as the papers with the WKN MC85J8 on Amazon (Morgan Stanley), DFL8WC on Apple (DZ Bank), JC4C9F on Alphabet (JP Morgan) and UD7ZF0 on Facebook (UBS). All papers benefit from falling share prices and are moderately leveraged. In this way, investors secure their portfolio against possible summer turbulence. Statistically, the months leading up to a US election are among the worst of a cycle.
The risk-reward ratio is unbalanced
The unbalanced risk-reward ratio currently speaks in favor of the puts by the big tech giants. These stocks are a so-called “crowded trade”, which means that they have already been bought on a large scale by large institutional investors. However, this also means that these stocks are susceptible to profit-taking after the massive price gains of the past weeks and months.
The latest statements by numerous CEOs of large US tech companies before the US Congress could be even more serious. Tim Cook & Co. have tried to downplay their importance to the US economy, but it is becoming increasingly difficult for customers to find alternatives to the products and services of these technology companies. They have virtually become providers with a huge impact on people’s lives, which is a thorn in the side of US politicians. Even if it is not yet clearly foreseeable, the intensive discussion between the influential tech bosses and parliamentarians has produced one thing: It is probably not a question of whether, but when companies will be more strictly regulated. The tech giants are at the height of their evolution, so take a closer look.
Daniel Saurenz operates the stock exchange portal Feingold Research. It offers a daily market letter that you can test free of charge for 14 days. Register at Info@feingold-research.com or try out the stock exchange service at this link