During the past month, the NASDAQ Composite (IXIC) hit a record high. Since bottoming out below 6,700 on March 23, IXIC soared above 10,800 on July 13. That's a 63% rise in less than four months. Further below, I'll show you how you can still get in on the action without overpaying for a lot of stocks you don't need. The adjective "tech-heavy" frequently accompanies any mention of the NASDAQ Composite. That's because most of Silicon Valley's most important companies are listed on the NASDAQ stock exchange. In fact, the five most valuable stocks in the S&P 500 Index - Microsoft (NSDQ: MSFT), Apple (NSDQ: AAPL), Amazon.com (NSDQ: AMZN), Alphabet (NSDQ: GOOGL), and Facebook (NSDQ: FB) - all trade on NASDAQ. Just how big are they? Combined, these five stocks comprise just 1% of the number of companies in the index. Yet, they account for 25% of its value since the index is weighted according to market capitalization. All of those fun facts aside, the critical takeaway is understanding why tech stocks have been performing so well lately. The coronavirus pandemic has forced almost everyone to adapt to a new way of life: - Telecommuting and videoconferencing from home.
- Shopping online and home delivery.
- Remote learning for students.
Even after COVID-19 has been eradicated, many of these adaptations will persist. In most cases, they are less expensive and more efficient than the alternative. For that reason, future earnings estimates for most tech companies have been upgraded, driving their share prices higher. Lagging Behind The one thing all of those wonderful technologies need to function is a very high-speed Internet that can handle a lot of data. Fortunately, the build-out of a nationwide 5G (fifth generation) wireless network in the United States is nearing completion. Soon, just about everyone in America will have direct access to this network. Also Read: Seize This Once-in-a-Lifetime Opportunity Sometimes, Wall Street can't see beyond the end of its nose. At the same time it is bidding up the share prices of companies that will soon be entirely reliant on 5G technologies for their revenues, it is largely ignoring the companies that will make it possible. Want proof? Consider the Defiance 5G Next Gen Connectivity ETF (FIVG). During the past 12 months, FIVG has gained 13%, less than half the 28% rise in the NASDAQ Composite. |
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