Why Are Technology and Financial Markets on Fire in 2013?

If you’ve been following technology and financial markets lately, you may have noticed that both sectors have been absolutely en fuego over the past year. Let’s use ETFs as a quick measure of the 2 sectors’ performances:

The iShares Technology ETF (IYW) is up 20% year to date, while the iShares Financials ETF (IYF) is up 30% over the same period. Equities have performed well in 2013, but there are also sector specific factors driving the strong performance in these two spaces. We’ll take a look at these factors and identify some of the stars that have separated themselves from the rest of the field. You’ve got a good excuse to be feeling rather smug right now if you were prescient enough to hold one of these.

iShare ETFs Technology Financials

Financials

Financial stocks and the stodgy institutions they represent usually don’t elicit much excitement from the average investor. The sector’s performance this year, however, has been anything but boring.

The most important driver for this performance is the economic recovery. Banks make their profits by lending money to companies and individuals. As the economy accelerates, companies will require more capital to invest in new machines and to recruit more employees. Likewise, the recovery in housing prices is spurring more people to purchase houses, which translates to more homebuyers borrowing money from banks via mortgages. An economy that’s perking up hence generates a lot of business for the financial services sector. As an added bonus, fewer loans will default since borrowers are more likely to be capable of repaying loans in a strong economy.

Another reason for the strong performance in banks is that the hangover from the 2008 crash is gradually fading. Many financial services companies were saddled with scrutiny (in some cases lawsuits) from regulators for aggressive lending practices during the housing bubble and misrepresentation of the risk carried by the securities they sold. A major legal overhang has been removed now that the bulk of these lawsuits have been settled. This eliminates a lot of uncertainty for investors and removes a major drag on the sector’s stock performance.

Here are a couple of this year’s MVP’s in the sector:

Financial stocks

Bank of America (BAC): Bank of America is a direct beneficiary of both factors listed above. As an integrated bank, it lends directly to both corporations and individuals. BAC also makes heaps of ancillary fees from arranging loans (matchmaking borrowers to other lenders) and trading them afterwards. It recently reached a settlement with Freddie Mac to end a dispute surrounding the quality of the mortgages BAC originated during the housing bubble.

Mastercard (MA): Mastercard earns its money by processing credit card payments. It collects a small percentage of each purchase paid for by one of its credit cards.  For every dollar you charge on a Mastercard affiliated card, MA collects roughly two pennies. Apply this to hundreds of billions of dollars in spending and those pennies add up quickly. Consequently, the pickup in consumer spending spurred by the economic recovery has led to very healthy growth in MA’s profits. MA supercharged growth further by aggressively increasing the number of merchants that accept their cards and inducing consumers to pay for their purchases with credit cards rather than cash.

Technology

Technology stocks have also enjoyed a solid run in 2013. Similar to bank stocks, tech stocks benefit directly from an improving economy. Companies are more likely to invest in upgrading their infrastructure and spend on new technology while their earnings are healthy. In addition, consumers spend more in an improving economy, which increases demand for electronic goods and the components that go into them.

Secondly, the performance of the tech sector tends to gravitate around a handful of bellwethers such as Facebook and Google. When these companies do well, and they’ve done VERY well this year, they tend to lift the performance of stocks across this sector.

Two of this year’s outperformers in the sector are:

Technology stocks

Google (GOOG): The continued proliferation of Google’s mobile operating system, Android, means that Google has its hands in people’s pockets around the world. Despite its size, Google continues to grow at an impressive clip while consistently generating margins that would make every CFO jealous. If you’re a growth investor, this is the holy grail of growth stocks. You can now trade in a dozen shares of GOOG for a pretty decent used car.

Facebook (FB): A major investor concern for FB heading into 2013 was whether or not it can generate significant advertising revenue from mobile devices.  FB put those fears to rest by increasing mobile advertising’s share of its total revenues from 5% to 13%, and predicting that it will eventually rise to make up half of its advertising revenues.  The stock price roughly doubled in the months after that announcement. Like GOOG, FB is a prototypical growth stock.

As the economic recovery gears up to a more mature phase, the opportunity for “easy money” in both of these sectors is probably over. Stocks usually do very well across the board in anticipation of a recovery and within its early stages. Following that, individual stock selection becomes more important, so keep searching for those potential MVPs!



*** BEST STOCK NEWSLETTER of 2020 ALERT ***

Updated September 13, 2020

At WallStreetSurvivor, we subscribe to dozens stock recommendation and advisory newsletters. There is ONE newsletter that is constantly outperforming all of the others--The Motley Fool Stock Advisor.

ONE of this year's Motley Fool Stock Picks Has Already quadrupled, ONE has tripled, and another TWO Have Already Doubled in just 8 months of of 2020!

We have been tracking ALL of the Motley Fool stock picks since January 2016. That's almost 5 years, 55 months and 110 stock picks. As of Friday, September 11, 2020 the Motley Fool's January 2 stock pick (TSLA) is up 333%, their March 19th pick (ZM) is up 209% in just 6 months, and another two have more than doubled. In addition, 6 of their 2019, 8 of their 2018, 8 of their 2016, 9 of theire 2017 and 13 of their 2016 picks have also doubled. Most impressively, over the last 5 years that we have been tracking every recommendation, their average stock pick is up 135%. That beats the SP500 by an average of 95%. And that's even accounting for all of this COVID mess that has wreaked havoc on most stocks. BUT, the Fool has done so well because they have quickly identified stocks this year that will perform well in the post-COVID world. THAT is how the Fool consistently does so well--they adapt and constantly pick stocks before everyone else realizes the opportunities.

  • CrowdStrike (CRWD) -- June 4, 2020 pick is already up 32%
  • Shopify (SHOP) – April 2, 2020 pick and it is already up 164%
  • Zoom Video (ZM) – March 19, 2020 pick and it is already up 209%
  • DexCom (DXCM) picked Feb 20, 2020 right before the market crashed and it is still up 41%
  • Tesla (TSLA) picked January 2, 2020 before the crash and it is up 333%
  • HubSpot (HUBS) picked December 5, 2019 and it is up 82%
  • Netflix (NFLX) picked November 21, 2019 and it is up 54%
  • Trade Desk (TTD) picked November 11, 2019 and up 117%
  • Zoom Video originally picked Oct 3 and it is up 398%
  • SolarEdge (SEDG) picked September 19, 2019 and it is up 105%

Now no one can guarantee that their next picks will be as strong, but our 5 years of experience has been super-profitable. They also claim that since inception, their average pick is up 529% and now we believe them. You sure don’t want to risk missing out. Many analysts are saying that we have passed the bottom of this COVID crisis and stocks will recover quickly. So make sure you have the best stocks in your portfolio.

Normally the Fool service is priced at $199 per year but they are currently offering it for a NEW SUBSCRIBER DISCOUNT of just $99/year if you click this link

CLICK HERE to get access to all The Motley Fool’s Stock Picks and their next 12 months of picks for just $99 per Year! 



GET UP TO $1,000 IN FREE STOCK

WHEN YOU OPEN A ROBINHOOD BROKERAGE ACCOUNT

Robinhood was the first brokerage site to NOT charge commissions when they opened in 2013. They just past 10,000,000 accounts and to celebrate they are offering up to $1,000 in free stock when you open a new account.

Here’s the details: You must click on a special promo link to open your new Robinhood account. Then when you fund your account with at least $10, you will receive one stock valued between $5 and $500. Then, you will get a link to share with your friends. Every time one of your friends opens an account, you will receive another free stock valued between $5 and $500. Click here to learn more about this Special Robinhood offer.

Claim your free stock NOW (before it’s too late)



One response to “Why Are Technology and Financial Markets on Fire in 2013?”

  1. […] get it right. Last year, for example, the average hedge fund gained just 11%, under-performing the S&P 500’s stellar 23% jump. But Goldman Sachs, which compiles the “VIP List” of the top 50 hedge-fund holdings every […]

Leave a Reply

Your email address will not be published. Required fields are marked *