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“Big Oil” had its era … so did “Big Steel.” But these days, it’s a “Big Tech” world, and we’re all just living in it.
That’s surely true in our daily lives. More Americans than ever before are working from home and ordering stuff online rather than heading to the office and local mall.
And it’s absolutely true in the stock market as well.
How so? Get a load of this data in a recent Wall Street Journal story:
• The top 10 largest companies in the S&P 500 just topped $8 TRILLION in market value. That’s greater than the individual market capitalization of all the largest, non-U.S. major stock exchanges.
• We’re only talking about 10 stocks, but those 10 names represent 29% of the S&P 500. That’s up six percentage points from 2019 — and the most “top heavy” the benchmark index has been in at least four decades.
• The first six names on the “Top Ten” list are all Big Tech firms, including Apple (Nasdaq: AAPL, Rated “B”), Microsoft (Nasdaq: MSFT, Rated “B+”), and com (Nasdaq: AMZN, Rated “B”).
Most of them are quasi-monopolies, so they’re reporting strong earnings in this COVID-19 world. They’re also getting even more (unneeded) help from the Federal Reserve to borrow money on the cheap.
As a result, their shares are crushing it. The tech-centric Nasdaq Composite was recently showing year-to-date gains of 22%. And because the S&P is now so tech-heavy, it’s doing fairly well, too — up 4% YTD.
But once you strip out the impact of mega-cap tech stocks, you get a much more subdued picture. The Dow Transports, for instance, were recently down slightly on the year. And the much broader Russell 2000 index of smaller-capitalization companies was down roughly 5%.
Now do you see why I say it’s a Big Tech world and we’re just living in it?
That has clear implications for investors — and I see three ways to profit ...
First, if you’re the kind of investor or trader who is comfortable riding powerful trends in the short term ... but cognizant of the fact they won’t last forever ... find dominant tech names and invest in them. My colleague Jon Markman manages a portfolio tailored to find these exact businesses in his Weiss Technology Portfolio.
Second, as great as tech stocks have been, there ARE other investments spinning off solid, respectable gains. They also address the tech sector’s biggest flaw: a general lack of big dividends.
My Safe Money Report focuses on these kinds of stocks. I’m happy to report they’re throwing off juicy payouts and generous returns for subscribers.
Third, don’t forget about the select stocks that are actually OUTPERFORMING tech. I’m talking about precious metals mining shares.
Gold and silver miners don’t get anywhere near the press Big Tech does because they represent a much smaller portion of the S&P.
But even if many others aren’t paying attention, I certainly am ... and you should, too! The metals recommendations I’ve made in the last several quarters have performed phenomenally.
When you’re fortunate enough to get a correction like we did in the last few days, make sure you take advantage of it to add exposure on the cheap.
In short, this is the kind of market where you can:
1. Profit from Big Tech.
2. Profit from stocks that give you the one big thing Big Tech doesn’t.
3. Profit from stocks that are (quietly) beating Big Tech.
I recommend you take that playbook and run with it!
Until next time,
Mike Larson
