Tech stocks had an uninspiring first half, following which they collectively lost multi-billion dollars in market capitalization. Given the steep declines, investors began discounting a rebound as fundamentals improve, prompting bargain hunters to step in.
Battered Tech Stocks Stem Rot: True to expectations, tech stocks did turn around after hitting a bottom in mid-June, a couple of weeks ahead of the end of the second quarter.
The primary contributor to the reversal in sentiment is the expectation that monetary policy tightening could be less aggressive going forward. The U.S. economy went through a second straight quarter of contraction – technically called a recession. The data point raised leads to hopes that the Federal Reserve may not be as aggressive as they were earlier this year.
The July consumer prices data showed a let-up in inflationary pressure, increasing the optimism further.
The Invesco QQQ Trust QQQ bottomed at $269.28 on June 16 and advanced over 22% from the level to $329.28 on Thursday. The ETF pulled back by 1.95% on Friday amid the volatility associated with options expiry and some hawkish Fed speeches.
How Did FAANGs Fare: Along with the broader market and tech sectors, the so-called FAANGs - Apple, Inc. AAPL, Meta Platforms, Inc. META, Amazon, Inc. AMZN, Netflix, Inc. NFLX and Alphabet, Inc. GOOGL GOOG also rebounded.
Apart from macroeconomic factors, earnings also played a part in the upside seen in these stocks. Despite the supply constraints and uncertainties around the demand side of the equation amid the economic downturn, most big techs reported fairly encouraging results.
An astute investor, who may have accurately predicted the bottom and taken a position in these stocks at their mid-June lows, may have generated decent returns.
How do the returns of the FAANGs compare with each other?
- A $1,000 invested in Meta at $154.25 (reached on June 23) would have fetched roughly 6.5 shares; This would have been worth $1,132.32 by Thursday, a return of 13.2%.
- A $1,000 invested in Apple at $129.04 (reached on June 16) would have fetched roughly 7.8 shares; This would have been worth $1,349.58 by Thursday, a return of 35%.
- A $1,000 invested in Amazon at $101.43 (reached on June 14) would have fetched roughly 9.9 shares; This would have been worth $1,402.93 by Thursday, a return of 40.3%.
- A $1,000 invested in Netflix at $164.28 (reached on June 14) would have fetched roughly 6.1 shares; This would have been worth $1,492.39 by Thursday, a return of 49.2%.
- A $1,000 invested in Alphabet at $105.05 (reached on June 17) would have fetched roughly 9.5 shares; This would have been worth $1,143.93 by Thursday, a return of 14.4%.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.