President Trump’s ban on China telecom giant Huawei is hurting technology stocks because Huawei is a big customer of prominent U.S. companies.
Which companies may be hurt more than others? For astute investors, segmented money flows provide an edge in doing good analysis. Let’s explore with the help of a chart.
Chart
Please click here for the chart showing segmented money flows in 11 popular tech stocks. Due to the popularity of these stocks, it makes sense to look at them in addition to the Dow Jones Industrial Average DJIA and ETFs such as the S&P 500 ETF SPY, Nasdaq 100 ETF QQQ and small-cap ETF IWM. Please note the following:
• Facebook’s FB stock is the only one with very positive smart money flows and momo (momentum) money flows. The reason is that Facebook does not do any material business in China.
• Alphabet GOOG, GOOGL just revoked Huawei’s Android license. Huawei has become a major force in smartphones and has been rapidly gaining market share. In the short term, Huawei phones are likely to keep working. It appears that Huawei phones will be able to maintain access to the apps on the Google Play Store.
Huawei may also be able to rely on AOSP (Android Open Source Project). Huawei has also developed its own operating system.
Huawei may be able to maintain its market share inside China. However, proprietary Google services will likely become inaccessible on Huawei phones and this may make it difficult for Huawei in international markets including India and Europe.
The chart shows that smart money flows are positive in Alphabet (Google) stock. In contrast, momo crowd money flows are negative.
Smart money flows make sense because Google does not generate material revenue from China.
• Intel INTC will lose some business from Huawei but the loss is not significant. Perhaps this is the reason that smart money flows in Intel stock are mildly positive. Furthermore, Intel stock is very oversold, provides a good dividend and the valuation is cheap. Of course, the momo crowd does not care about these things; momo crowd money flows are negative in Intel stock.
• In a surprise, the momo crowd money flows have just switched from positive to negative in AMD AMD stock.
• China poses significant risk for Apple AAPL stock, though momo crowd money flows are very positive.
• Amazon AMZN does not drive material revenue from China. Momo crowd money flows are positive in Amazon stock. Smart money flows are neutral. Perhaps because of concern that if the market falls, Amazon stock may be hit hard.
• Momo crowd money flows are very positive in Netflix NFLX stock but smart money flows are mildly negative.
• Smart money flows in Alibaba BABA stock are neutral. The reason may be that Alibaba is likely to continue growing irrespective of the trade war.
• Smart money and momo crowd money flows are negative in Nvidia NVDA stock and Tesla TSLA stock.
• Smart money and momo crowd money flows are neutral in Microsoft MSFT.…Read more at MarketWatch.
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