Quite a few of my friends have been asking me what I was invested in recently.
When I mentioned that I was invested in Big Tech, they were a little stun for 2 reasons.
1. Why would anyone stay invested in the current market?
2. Why would anyone want to invest in Big Tech now?
Decided to pen down the explanation once and for all.
What I Own Currently
Amazon and Microsoft.
What I sold recently:
Facebook, at $250
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I Bought It Long Ago
I bought Amazon when it was in the $900 range, Facebook when in the $170 range, and Microsoft at the $150 range
So they have done pretty well for me.
But, if you were to invest in them today, you might not get the same results as I did.
So do your own due diligence, research, and understand if that investment is suitable for you.
Why Have I Not Sold My Big Tech?
Despite the whole anti-trust congressional hearing, Big Tech reaching new highs, the whole COVID situation, and huge disconnection between the stock market and the real economy, I remain long-term oriented and still think Big Tech has a lot of potentials.
Break-Up Or Not?
An anti-trust congressional hearing happened recently with the CEOs from Apple, Amazon, Alphabet, and Facebook.
It does not bother me whether or not they are broken up or not.
If they are not broken up, they can "keep their monopolistic business", which means more growth and profits.
That makes sense for me to continue holding them.
If they are broken up, most analysts expect that it will lead to a temporary rise in the stock prices of these companies.
A "conglomerate discount" is usually applied to companies that are huge.
Breaking up Big Tech might release more shareholder value.
Such breakups tend to unleash lots of shareholder value.
Case in point, eBay+PayPal and AT&T.
Split Shares Or Not?
Apple announced that it will split its shares 4-for-1.
Basically, shareholders will receive 3 additional shares for each Apple share they own.
That will make the share price lower from $400+ to $100+, making it more affordable for retail investors, thereby increasing the investor pool.
Generally, share splits have been met with a slight uptick in the share prices.
Because now more funds can afford to invest in the cheaper share price.
Amazon is now trading at $3,100+, Microsoft at $200+, Facebook at $250+, Alphabet at $1,500+.
Sounds to me like it's a good time to split the shares and give it a slight pop in the share prices.
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Conclusion
These are the 2 reasons why I'm keeping my investment in Big Tech for now.
Are they undervalue or overvalue?
That's up to the individual's interpretation.
To me, for now, they are undervalued or at fair value.
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I would say Big Tech overall currently is at fair value. Over 6-12 months, some names may be considered over valued. But market is looking out 3-5 years.
ReplyDeleteApple, Amazon, Google, FB are going through today what Microsoft went through most of the 1990s (when I started work in IT).
It culminated in 1998 with the US govt taking Microsoft to court, and in 1999 a Federal judge found Microsoft guilty of unfair monopoly tactics & undermining competitors. The judgment was actually for Microsoft to be broken up into 2 entities.
In reality big money & big corporations win ... MS appealed & finally in 2001 reached at agreement with the US govt to "share" some of its code with competitors for next 5 years. LOL!
Very ironic for Apple, as it was one of the loudest plaintiffs in the 1990s that led to the US govt suing Microsoft.
Just curious, if your friends don't like big tech and think prospects are poor, what are they investing in then? Few things have beaten big tech these last few months.
ReplyDeleteHi FI35,
DeleteThey using StashAway & the likes. Guess that removes the "selection" out from the "investing" process.