Does This Old-Timey Big-Cap Tech Rotation Have Legs?
As Magnificent Seven stocks trigger rotation out of the broader market, I'm eying opportunuties in another sector.
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The very good earnings reports from Microsoft MSFT and Meta META have triggered strong rotational action on Thursday morning. The "buy big cap tech and sell everything else" algorithm is working.
The Magnificent Seven MAGS names are trading up 3.4%, while the Russell 2000 IWM is negative, and the DJIA lags with a gain of 0.6%. Early breadth is just slightly positive despite the big jump in the Nasdaq 100 QQQ of 1.7%.
The Mag 7 has been lagging for months, and there has been rotation into small-caps, biotechnology, and other secondary groups. So, it isn’t too surprising to see some very good earning reports from Mag 7 names trigger a reversal of this rotational action.
The question, of course, is whether this rotation will be sustained. Is this the start of renewed outperformance by the Mag ?
For more than a year, the indexes were led higher by this small group of mega-cap technology names. Most stocks did poorly, but they were hidden under the index returns. It was miserable action for anyone who didn’t just pile into the small group of stocks that drove the indexes. It was inevitable that it would reverse, but it is still quite early in the game.
My feeling is that this is just a temporary reprieve for the Mag 7 and that we are unlikely to see the same sort of disparity in action that occurred last year.
I view this as an opportunity in biotechnology names I favor and am looking for more entries. The biotech sector is currently down 1.1% versus the Mag 7 jump of 3.4%.
Don’t forget that Amazon AMZN and Apple AAPL report on Thursday after the close and faced very different obstacles than Microsoft and Meta. Both are very dependent on China and that is not a good situation to be in right now.
Also, the jobs report Friday morning will be particularly important as it should reflect some of the fallout from the tariff turmoil.
I’m looking to add to names such as Xeris Biopharma XERS, BridgeBio Pharma BBIO, and ADMA Biologics ADMA, but I am moving slowly.
At the time of publication, Rev Shark was long XERS, BBIO and ADMA.
