Value Rotation!?
Updated
Over the past couple of days there has been a lot of talk and action in the "growth to value" rotation trade. Here's the forward p/e's for some popular value names:
KO: 25
DIS: 45
WMT: 26
UNH: 19
XOM: 26
Lets not forget about all the "vaccine optimism" stocks (cruiselines, airlines) currently being poured into right now with horrible fundamentals.
All brought up because Facebook currently has a forward P/E of 26! It's my personal belief that there is no one or the other here. Either there is a broad based market sell-off coming or the market is going to be brought up by both value and growth. Instead of everything being a winner though, it will turn into more of a stock pickers market.
Cloud / Stay at home stocks are extremely overvalued, a correction in these names could continue lower as the market churns higher. AMZN not out of the woods either if all these retail stores start to draw back more customers. Meanwhile, there is FB, AAPL, and GOOGL that I think benefits as much as any other company from a re-opening of the economy. How many people go out to eat and whip their phone out? What about going on a cruise? Going to a sporting event? What are the odds someone takes pictures/videos and posts them to Facebook/Instagram? Then checks their phone 10 more times that day to see how many likes/comments their post got? It just gives people more reasons to use these apps.
Facebook and Google in particular are heavily ad revenue based. What happens when all these struggling companies start to generate more revenue again? They spend MORE MONEY ON ADVERTISING!
When the dust settles, I think people take a good hard look at the good industries to be in and bad. Digital content and media just continues to become more and more ingrained in peoples lives. Meanwhile, so do electric cars. Last time I checked those don't take gasoline to run...Hard to see Facebook not being a winner if the market goes higher from here.
Chart is petty simple for me.
Above the white line = Upside potential to the green trendline
Below the white line = Downside potential to the red trendline
KO: 25
DIS: 45
WMT: 26
UNH: 19
XOM: 26
Lets not forget about all the "vaccine optimism" stocks (cruiselines, airlines) currently being poured into right now with horrible fundamentals.
All brought up because Facebook currently has a forward P/E of 26! It's my personal belief that there is no one or the other here. Either there is a broad based market sell-off coming or the market is going to be brought up by both value and growth. Instead of everything being a winner though, it will turn into more of a stock pickers market.
Cloud / Stay at home stocks are extremely overvalued, a correction in these names could continue lower as the market churns higher. AMZN not out of the woods either if all these retail stores start to draw back more customers. Meanwhile, there is FB, AAPL, and GOOGL that I think benefits as much as any other company from a re-opening of the economy. How many people go out to eat and whip their phone out? What about going on a cruise? Going to a sporting event? What are the odds someone takes pictures/videos and posts them to Facebook/Instagram? Then checks their phone 10 more times that day to see how many likes/comments their post got? It just gives people more reasons to use these apps.
Facebook and Google in particular are heavily ad revenue based. What happens when all these struggling companies start to generate more revenue again? They spend MORE MONEY ON ADVERTISING!
When the dust settles, I think people take a good hard look at the good industries to be in and bad. Digital content and media just continues to become more and more ingrained in peoples lives. Meanwhile, so do electric cars. Last time I checked those don't take gasoline to run...Hard to see Facebook not being a winner if the market goes higher from here.
Chart is petty simple for me.
Above the white line = Upside potential to the green trendline
Below the white line = Downside potential to the red trendline
Note
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