The S&P 500 index is up 11% since the start of last September yet three well-known and large component names have lost value over the same time period, Cornerstone Macro’s Carter Worth said Friday on CNBC’s “Fast Money.”
The three laggards
Since the start of September, shares of Amazon.com, Inc. (NASDAQ: AMZN) are down 5.5%, shares of Adobe Inc (NASDAQ: ADBE) are down 9% and shares of Facebook, Inc. (NASDAQ: FB) are down 11%.
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These are all “super-cap, marquee growth names” that are long-term winners but undergoing near-term weakness, Worth said. In Facebook’s case, the social media’s stock is underperforming the S&P 500 index by 2,000 basis points.
Investors looking at these three names are left wondering if the weakness is attributed to potential rate hikes and if a new stock multiple is warranted in such an environment, he said.
“They are all being sort-of unloved now,” he said. “The question is this period of underperformance an opportunity or is it just the beginning of worse [performance].”
Worth said he believes the market will ultimately decide that the weakness is a buying opportunity. Here is an Biedex Markets.com analysis of Amazon’s stock after founder Jeff Bezos announced his retirement as CEO.
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Bullish on the S&P 500 means bullish on the 3 names
Based on historical data, the market “can only go up if these big laggards come alive,” he said. Specifically, when tech stocks are down on any given trading day, the S&P 500 is traded down in unison 80% of the time.
And when the S&P 500 growth index is down, the S&P 500 traded lower 93% of the time. As such, the S&P 500 can only rise if Amazon, Adobe, and Facebook’s stock rise.
Jeff Mills: Take a step back
Commenting on Worth’s stock picks, Bryn Mawr Trust Chief Investment Officer Jeff Mills said that we need to take a step back and look at the bigger picture. Granted, the three stocks mentioned are experiencing near-term weakness, but they are longer-term winners in a big way.
In Amazon’s case, the stock is up around 530% compared to a 120% gain in the S&P 500 index over the past five years, Mills said. Amazon shouldn’t be viewed as a “catch-up” trade given existing catalysts today that are supportive of consumer buying activity. These include strong retail data so far in 2021, warming weather, and the reopening of more economies across the US.
“I think you have a couple of quarters ahead of some very strong stimulus-driven growth,” he said.