Wealth management firm Bireme Capital warned in its just-released December investor letter that "the perfect landing is fully priced in, with only downside risks remaining." The firm has made a massive underweighting of large-cap technology stocks.
In late 2020, the firm's fund managers called Apple (AAPL.O), Amazon (AMZN.O), Microsoft (MSFT.O), Meta Platforms (META.O) and Alphabet (GOOGL.O) "outperformers" , and was surprised that many of these companies have lower P/E ratios than the Nasdaq 100 and often have lower valuations. In 2023, they seized the opportunity again and bought Meta at a price of $110 per share, and also increased their position in Netflix (NFLX.O).
However, now they say they have sold their Netflix position and significantly reduced their Meta holdings, while also shorting Tesla (TSLA.O) and Apple. The company pointed out that Tesla is a car company that makes profits from cars, but it has been pretending to be a technology company with profit margins from technology companies. Now this disguise has become increasingly difficult, and Apple’s valuation has increased from high Driven by speed expectations, its growth rate is not high.
Overall, they believe the seven largest tech stocks and their peers still have strong businesses, but valuations are no longer as reasonable.
“Given today’s unprecedented concentration, the fate of the major stock indexes — and the wealth hundreds of millions of Americans have gained through retirement savings and pensions — is increasingly tied to the performance of a few increasingly overextended stocks.”
The company began shorting Apple in the third quarter of last year, which also means that it missed the 48% rebound in 2023. In addition, the company shorted ARM (ARM.O) in the second half of last year, believing that its valuation was too high and that raising chip prices could be counterproductive. The team also took a short position in C3.ai (AI.N), blasting the artificial intelligence enterprise software provider for burning cash and changing its name to fit "what they call a hot new trend." C3.ai surged 156% in 2023, but is down 13% so far this year.
Better options, they say, are Snowflake (SNOW.N), GitLab (GTLB.O) and Datadog (DDOG.O).
Article forwarded from: Golden Ten Data
