T.W.I.T. #9: US10Y crosses 1%, Semi outperforms
Welcome to T.W.I.T #9, where we review this week’s developments and link to five articles worth reading.
Performance Review
The market this week was focused on the Georgia Senate race run-off on Tuesday, assuming Democratic control of the Senate would increase the chance of infrastructure spending and stimulus. It is also worth noting that Bitcoin was up 41% vs USD in the week.
The S&P500 was up 1.8%, led by Energy and Materials. The Technology sector (XLK) was up 0.1%. A mong a reflationary trade, with the US 10y yield crossing 1% Wednesday 6th for the first time since March, Semiconductors outperformed with the SMH up 5.5%, whilst Software (IGV) underperformed at 0.3%. Despite the rise in yield, the BVP Emerging Cloud Comp Index median return was 1.6%, above the IGV; 61% of the stocks in the BVP Cloud Index outperformed the IGV. But within it, the highest EV/Forward Revenue stocks performed worse as one would expect. Still, I think investors were bracing for more of a bloodbath than what we saw this week.
From a size and style standpoint, we saw more risk appetite, with Small-Cap (IJR/SPY) up 4% in the last week, whilst Large-Cap Growth (IVW/SPY) is down 0.5%.
Key Developments in Tech World
IPO. Roblox decided to go direct listing. They raised money from great tech investors this week (Altimeter) and will list in February. I published a short analysis of Roblox in a previous post here.
Semis. The industrial and automotive end-markets continue to recover, with a positive pre-announcement this week from STM. Many automakers are also starting to report that semiconductor shortages are causing a delay in output. Dialog pre-announced in iPhone upside. On the memory side, a positive earnings report from MU, but the share price faded on the release, suggesting cautiousness on the length of the memory cycle.
On the semicap equipment side, more positive news as TSMC 2021 Capex was rumoured to reach US$20bn (vs cons $18bn) driven by 3nm capex and 2nm R&D. 7nm/5nm capacity will be fully loaded, 3nm ramp in 2Q22 thanks to 5G/HPC customers.
Internet. Amazon, Apple, Netflix, Facebook and Google continued to underperform. As investors prepare for a reflationary trade, large caps should underperform. Cyclical recovery beneficiaries outperformed, especially those exposed to travel (OTAs). All of the large internet franchises suffer from regulatory concerns, amplified this week by the results of the Georgia Runoff and the responsibility they are perceived to have in the Capitol event. On Facebook specifically, Elon Musk urged his followers to switch to Signal after WhatsApp issued an update to its privacy policy.
Five articles worth reading this week:
· “Lame Duck Delisting” on China de-listings
· On “the Apple Car”
· A different perspective on Chinese Tech Giants accounting
· On the role false rumours and social media played in the Capitol incident
· On leveraging software for a personalized spaced repetition experience
That’s all for T.W.I.T. #9, Week 01 2021.
Originally published at https://kinesisinvesting.com on January 10, 2021.
