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Bull markets digest gains through sector rotations. Small caps and the so-called “back-to-normal” stocks have led the market higher since the first Covid vaccine was approved last November. In the meantime, mega and large cap tech stocks have been lagging for the most part. This changed last week. Maybe it is the approaching new earnings season and the realization that no interest rates spike is going to change the fact that those stocks are highly efficient cash-generating machines with clearly sustainable competitive advantage. Rare assets rise during periods of rising inflation expectations: AAPL, AMZN, FB, GOOGL, MSFT, NVDA, NFLX.
MRNA and BNTX – the mRNA vaccine stocks have woken up. Both obviously have remarkable earnings and sales growth but for the past few months, their products have been considered generic – with no longer-term edge. Just a couple of vaccines among many other vaccines that are likely to get approved in the next year or so. With AstraZeneca vaccine having troubles getting people’s trust in Europe and Janssen getting some bad press in the U.S., Moderna and Pfizer/Biontech have become a desired brand – I don’t know if it is actually true but they are currently widely perceived as safer and if not safer, then at least much more effective than their competitors. This is starting to be reflected in their prices.
Obviously, semiconductor stocks are still the leaders – just look at the tight-range consolidation most of them are exhibiting after their big breakouts two weeks ago. They might need more time to digest but many are acting in a constructive manner – MU, TSEM, TSM, AMAT, HIMX, QRVO, SWKS, KLAC, KLIC, LRCX, NVDA, etc.
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