Where The Money Is
While many investors were fretting that a correction is coming, the tech-centered Nasdaq average reeled off ten straight up days, rising 5% in that span. Certainly, there will be market corrections from time to time, as there always have been, but the market continues to reward those thoughtful investors who combine patience and perspective.
The other stock indices are also in record territory with the S&P 500 now up 10% since January. Technology stocks led the advance. Apple (AAPL-$150) is up 30% so far this year, Broadcom (AVGO-$254) 43%, Nvidia (NVDA-$166) 54% and Amazon (AMZN-$1,028) 37%. Leadership changes and Cisco (CSCO-$31) has gained only 5% while Intel (INTC-$34) lost 5% with Qualcomm (QCOM-$54) down 13%.
Technologically strong companies in other fields are also strong. Amgen (AMGN-$180) has gained 23%. Celgene (CELG-$136) 16% and Visa (V-$98) 25%. Many overly popular stocks faded like Disney (+2%), Verizon (-18%), Bristol-Myers (-5%), Proctor & Gamble (+5%), GE (-14%), IBM (-11%), Pfizer (+3%) and Costco (-2%). The oil sector continues to stagger with Exxon (-10%), Chevron (-11%) and Occidental (-14%).
Our portfolios continue to emphasize large, growing companies with demonstrated technological strengths. Why? As the notorious Willie Sutton said, “I rob banks because that’s where the money is.”
Technological capabilities are becoming even more dominant. Thomas Friedman, the New York Times columnist, singles out 2007 as a benchmark year when software began “eating the world,” as Netscape’s founder said. Only ten years ago, there were no iPhones, Teslas, Kindle, Facebook, Twitter, Uber or Airbub.
These accelerations stem from Moore’s Law (that microchip power would double about every two years), a prediction by Gordon Moore, an Intel cofounder, which has proven accurate since introduced in the 1970’s. The “law” has become a driving force of technological and social change, productivity and economic growth. Had Moore’s Law been applicable to cars, Mr. Friedman points out that a modern descendent of the 1971 Volkswagen Beetle could go 300,000 miles per hour, use one tank of gas on its lifetime and would cost 4 cents.
The accelerating pace of technological progress interacts with our climate and markets. Widespread use of ATM’s is actually increasing overall bank employment as they facilitate opening new branches. In Niger, climate change is destroying crops even as technology helps more children survive. The results are a projected population growth from 19 million to 72 million hungry people by 2050.
It’s taken 17 years for the technology sector to bounce back from the “dot-com” bubble of 2000, when investors were overcome with greed for anything that was linked to the exciting new “Internet.” Even when the Internet has become an everyday staple, cloud computing is an emerging solution to the exponential growth in creation of data that needs storage. Artificial intelligence has gone from science fiction to actual use.
We were lucky to increase the weighting of tech stocks in our portfolios. Oprah Winfrey says, “Luck is preparation meeting opportunity.” The pace of change of technology can be unsettling, yet it must be met. Mr. Friedman writes that hope lies in the developing field of online education. Those who cannot continue their education after they leave traditional schools may face difficulties.
One online school is www.coursera.org, a non-profit currently offering over 2,000 courses from famous universities with over 25 million students enrolled. I’ve taken “Financial Markets” by Nobel Prize winner Robert Schiller, joining 150,000 other students. Our class comprised more at once than he taught in total in 32 years at Yale.
Technology is where the money is and Woody Allen says, “Money is better than poverty, if only for financial reasons.”
Tony Crowell manages stock portfolios for individuals and their trust and retirement accounts with CROWELL•ROBERTS Investment Counsel, a registered investment advisor in Laguna Beach since 1995. [email protected] 949.494.1376/800.697.2622
