ByPaul R. La Monica, CNN Business
Investors who bought all the tech giants blindly got a rude awakening after Netflix collapsed. However, Tesla’s good news proves that there are some top momentum stocks that can thrive in this volatile market.
The latest results from Tesla and Netflix (NFLX), show how stupid it is for investors that they buy into themes and memes such as the FAANGs or MT. FAANG if you want Microsoft (MSFT), Tesla (TSLA) and Apple (AAPL) to the Facebook/FB (Meta) (Meta/Amazon/Apple/Netflix/NFLX (Alphabet).
This is a stock picking market.
This environment will provide a favorable backdrop for active investing, according to Ken McAtamney of William Blairs global equity group. In a report.
He said that understanding companies with distinct business models, unique cultures and durable competitive advantages will be more important to determine investment performance in this complex environment. He also noted that the dynamic shifting corporate winners and losers is a constant.
Investors can make the biggest mistake of believing that all stocks in a particular sector will rise or fall in tandem. This is a simplistic and binary view of the world.
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Instead, investors should do their homework to find companies that have strong business models and solid fundamentals.
Paul Moroz, chief investor officer at Mawer Investment Management, stated that not all businesses are created equal.
Moroz stated that it is becoming more important to find companies that don’t rely on discretionary consumer spending. He noted that boring companies such as Marsh & McLennan, an insurance broker, and Bunzl, a UK-based cleaning products firm Bunzl are doing well.
And even within the tech sector, Moroz said he likes Microsoft(MSFT)because of the steady subscription revenue for its many business software products.
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Even in Nasdaq, there’s still broad diversity of companies
TheNasdaq’s Big Tech leaders are a diverse group. Investors shouldn’t assume that Netflix’s problems are bad news for the rest of tech, or that Tesla’s positive news is a signal to traders to buy every momentum stock.
Our first quarter results have shown that we believe investors need to be selective. Mark Haefele is chief investment officer at UBS Global Wealth ManagementIn a report this week.
Haefele stated that Tesla’s record profit reflects rising global demand for electric cars and that Netflix’s disappointing result shouldn’t be a hindrance to the positive outlook for subscription services.
Netflix’s major miss could end up being a company-specific issue. It’s not a reason to ignore all the FAANGs.
Investors will still flock to companies with strong results. Tesla’s success shows that traders don’t fear high-priced stocks, which Warren Buffett and other value investing gurus tend to avoid.
Tesla is indeed expensive when you compare it with other auto companies. However, Tesla may live up to its hype as long as it lives up.
The ability of Tesla to reach a trillion dollars valuation is a confirmation of the rationality of paying up for future earnings potential with the right business model, stated Louis Navellier (founder of Navellier & Associates), in a Thursday report.
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