A SMALL LOSS FOR BIGTECH HAS MEANT HUGE GAINS FOR HUNDREDS OF STOCKS
After monopolizing investor’s attention for most of 2020, something changed for BIGTECH and Momentum stocks on 9/2. That seemed to be the day that managers decided that it was okay to own something other than the very largest growth stocks.
TPA warned clients about this change in World Snapshots on 9/3, 9/24, and 10/8. This change in behavior has been negative for BIGTECH and Momentum stocks in general, but due to the outsized nature of BIGTECH, it was actually extremely beneficial for a wide swath of other stocks.
The first table below shows that on 9/2 the market cap of BIGTECH represented 25.8% of the S&P500 and 35.5% of the Russell 3000 (R3000 represents 98% of all publicly traded stocks). That meant that even a small shift out of BIGTECH into other stocks would be hugely beneficial for those other stocks.
BIGTECH market cap has gone from $9.745 trillion on 9/2/20 to $9.005 trillion on Monday’s close (table 2 below). That is down 7.5% or $740 billion. The market cap of the 8 stocks in the BIGTECH is still as big as the next 38 stocks in the S&P500. It is also as big as the bottom 394 stocks in the S&P500 or 78% of the benchmark index and as big as the bottom 2518 stocks in the Russell 3000 or 83% of that index.
The first 3 charts below show that while the TPA BIGTECH and TPA Momentum indexes have failed to recapture their 2020 highs, the broader S&P500 index has regained its former peak.
Charts 4 and 5 below show that although TPA BIGTECH was the clear winner until 9/2/20, it has trailed the S&P500 and the broad Russell 3000 Index since 9/2/20.
Where has the money gone that would have been used to buy BIGTECH?
The top 100 biggest percentage movers in the Russell 3000, from 9/2/02 to 11/23/20, were up 88% on average and had an average market cap of only $3.2 billion. By contrast, the average market cap of the 8 stocks in the TPA’s BIGTECH Index is $1.125 trillion.
Together the top 100 biggest movers from the Russell 3000 had an aggregate market cap of $321 billion or less than 1/2 of the $740 billion loss in market cap for BIGTECH.
Conclusion: A small surrender in market cap for BIGTECH has turned into a windfall for a whole universe of previously shunned stocks.