For much of the past four or five years, Facebook, Apple, Amazon, Netflix, and Google (or Alphabet as it is now known), the so-called FAANG stocks have captured investors’ imagination. This selection of tech giants has led the market higher, helping the S&P 500 reach new highs as other companies have floundered.
Tencent, Alibaba, TSMC and Samsung have achieved the same halo effect in Asia. Between the beginning of February 2016 and their peak earlier this year, these four companies added a combined $1.1 trillion in market value.
Unfortunately, investors have been just as eager to sell these stocks on the way down as they were on the way up.
Since topping out earlier this year, these four Asian tech giants have lost a combined $506 billion in market value. Tencent has suffered more than any of its peers, according to an analysis conducted by analysts at CLSA, the decline in market value from 2018’s peak, as a percentage of the firm’s market capitalization in February 2016 is 135%. In other words, in just a few short months, selling has wiped out around two years of gains.
It is not just the Asian giants that are suffering. FAANG stocks are also feeling the heat. Combined, these two groups have seen $1.2 trillion in market value wiped off their shares since peaking earlier in the year.
Is this just a setback, or the beginning of something more serious? The team at CLSA believe there’s a 50/50 chance that we are at the beginning of a much more significant decline, a decline that could mirror the 2000 — 2003 market slide.
FAANG stocks have been responsible for a significant percentage of the S&P 500’s gain since the financial crisis. According to analysis carried out by CLSA, since March 2009, 25 companies in the S&P 500 have added $100 billion or more to their market caps.
Of these, only four have added more than $600 billion, Alphabet, Microsoft, Amazon.com and Apple.
The performance gap between this select group of equities and the rest of the market has only accelerated in the past two years.
At one point earlier this year, Amazon had added more in market cap than the combined value of Walmart, Target and Costco put together. Even though it’s off more than 25% from its highs, the stock is still up more than 32% in 2018.
Since March 2009, when the S&P 500 bottomed, only 38 of the 337 stocks that remain in the index have gained more than 1000%. Top four gainers are Fifth Third Bankcorp, NVIDIA, Amazon.com, and Expedia. These are the only stocks to have gained more than 2000% since March 2009.
Considering the outsized impact FAANGs have had on the market for the past ten years, CLSA’s leading technical analyst Laurence Balanco estimates that the chance of a 2000–2003 style market slide is now at 50%.
Crypto Expert: Bitcoin Could Reach A Staggering $50k Next Year
Just when you thought cryptocurrencies had bottomed out, the market was hit by yet another crash last week. Bitcoin’s value plummeted 14% in under 24 hours last week, dropping to below $5k, a new low for the cryptocurrency in over a year.
In fact, this has been one of the biggest bear market crashes in the history of Bitcoin. In a period of about 300 days, Bitcoin has slumped over 80% from $19.6k to about $3.7k. Back in 2011, the cryptocurrency nosedived almost 97% to $2.2, shedding nearly all its value.
Marius Kramer, touted as a cryptocurrency expert, highlighted that the correction could be triggered by investors who entered the market at below $5k, liquidating their investments in the cryptocurrency to avoid losing their initial investment – eventually driving its price down further.
Why is Bitcoin plummeting?
Despite critics, Kramer claims that the recent pullback was engineered by crypto whales who manipulate prices regularly. They have driven the crypto market lower, where the Bitcoin reached a 14-month low of $3.5k.
The speculative movements in the cryptocurrency market may result in significant losses for investors and could cause the market to tank. Most often, crypto whales use this move to re-enter the market at a much cheaper price.
Despite the catastrophic crypto developments of late, Kramer claims the downturn is simply the calm before the storm.
According to Kramer, Bitcoin might touch $50k by the end of the next bull run, estimated to be six months away. “I predict the bull market to start in late September, reaching a Bitcoin price of $20,000 throughout October, November and reach its peak of $50,000-$100,000 in December, January or even $150,000 with a bit of luck,” he wrote.
Bitcoin has risen by an average of 17x in every bull run. With the cryptocurrency trading at $4k per coin, a 17X return — the price might touch $68k. However, with the next bull run at least six months away, the market might well be choppy heading into the end of 2018.
Bitcoin price prediction
Crypto experts believe that the next rally will begin around Jan. 24, 2019, which is the estimated launch date of BAKKT – a trading platform for digital assets that is set to be launched by NYSE owner, Intercontinental Exchange (ICE).
Kramer expects Bitcoin’s price to rise to $10k around this time. He has also predicted a pullback to around $6k shortly after its rise.
Here’s a timeline of Kramer’s forecast for the cryptocurrency.
- November 2018: Bitcoin will move back and forth between $4k and $4.8k
- December. 2018: Price will touch $6k by Dec.10 and $8k by end of 2018.
- January 2019: Price picks up momentum with the upcoming BAKKT launch and reaches $12k by Jan. 24. It then gets dumped to $8k
- February and March 2019: Price bounces between $8k and $10k
- April 2019: Price crosses $12k again
- May-December 2019: Price may touch an all-time high and reach $50k with several blockchain and tokens showing users numerous technology applications.
If You Invested $10,400 In WWE In ’99, You’d Be A Millionaire By Now
Earlier this year, we looked at WWE’s 4x returns in the first nine months of 2018. This stock has been crushing it on the stock exchange and more than quadrupled in value.
Though the recent pullback impacted investor returns slightly, it has still gained a staggering 142% this year.
So what if you had bet on The Rock and Stone Cold Steve Austin way back in 1999? That was the year WWE went public. What if you put aside $200/week and invested it in the WWE stock?
Your investment would be worth $1M today
Yes, your $200/week investment for the last 19 years in WWE would have made you a millionaire. However, just like any other stock, WWE has had its share of ups and downs.
In December 1999, the stock was trading just shy of $18 a share. Over the next four years, it fell to $11. Though it rose over the next couple of years, the stock slipped again to the $10 mark around the end of 2011.
WWE shares only began its staggering bull run by the end of 2014, where the stock rose from $14 to its current price of $73.6. The stock touched an all-time high of $97.69 earlier this year.
Are these returns impressive?
What if you had invested in WWE when its IPO (initial public offering) was launched in 1999? A $200/week investment amounts to an annual investment of $10.4k. This then amounts to just over $200k over the next 19 years.
With a payback of $1M, the annual rate of return is 16%. Is this enough for the amount of risk undertaken?
Despite the $1M tag it promises, any other major index or alternative investment vehicle such as REITs would have generated similar returns with a far lower risk exposure.
Imagine an investor who had actually invested during the IPO. He would have had to wait for 16 long years just to break even.
What’s the way forward for WWE investors?
WWE’s traditionally focused on male wrestlers, skewing to their male-dominated audience. But it looks like that could change.
Led by former UFC superstar and current WWE Women’s champ Ronda Rousey, the company has staged its first-ever PPV this year in an ambitious attempt to broaden their female audience base.
This event included over 50 female wrestlers from the “Raw” and “SmackDown” franchises.
Wall Street estimates WWE’s sales to rise by 60% over the next two years to $1.27B, up from $800M in 2017. With rapidly improving profit margins, earnings are also expected to grow at a significant 71% over the next five years.
In fact, WWE’s net margin is expected to rise from a mere 4.1% in 2017 to 22% in 2020.
Though WWE’s stock lost over 25% in market value since October this year, analysts are again betting big on them.
Cannabis Scorecard: Top 5 Marijuana Stocks To Invest In
Marijuana stocks have been pretty volatile over the last two months. The stocks were in a spectacular bull run a few months before Canada legalized cannabis for recreational use.
The downfall in the second half of October saw investor capital nosedive substantially. This was a classic case of “Buy the rumor, sell the news” kind of an event.
How are top marijuana stocks performing? Did they recover investor losses or did they drop further? Here’s our scorecard on the top five pot stocks.
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