Hope springs eternal? At least for tech it does. Every year for the last three years the market has come in hot, with the real strength in the Nasdaq and despite the louder averages, I don't want you to think anything's different.
Today we saw some remarkable moves in all sorts of tech stocks as analyst after analyst came out of their fox holes and boosted stocks with bullish recommendations that reverberated throughout the entire tech complex. It's a special time, a moment when analysts survey their universe and make predictions and the predictions are almost universally bullish.
Why not? There's plenty to like, plenty to push and it's time-honored. So a preannouncement of a better than expected quarter from Microchip (MCHP) infects all sorts of semiconductor stocks, which jives with a very big upgrade of Micron (MU) and Western Digital (WDC) by Cowen. Strong demand and short supply for their commodity chips is driving the companies' sales, and you should always buy these coming off the bottom even if the bottom was caused, in part, by Micron, cutting production not once, but twice, to turn pricing around for DRAMs.
The captains of tech sound off at the CES, the gigantic trade show of consumer tech and it's all bullish. Lisa Su, the fabulous CEO from Advanced Micro (AMD) , talks about the strong demand for her data center, p.c. and gaming chips and gives a spectacular road map for future sales. Colette Kress, the brilliant CFO from Nvidia (NVDA) , talks about how inference chips, actual thinking chips, are becoming a real part of the business and not just pie in the sky. Is it possible that one day we will be able to create our own party of hologram people to have a conversation with, perhaps even learn from? You bet it will. What a concept.
If the customers are buying semiconductors in record numbers, then the semiconductor companies need more capacity so they buy equipment, and you get the stocks of Applied Materials (AMAT) and Lam Research (LRCX) soaring.
Executives are showing off all sorts of new devices and express tremendous excitement for the early demand for 5G, which could be the biggest tech cycle in history. 5G ripples through everything from Skyworks Solutions (SWKS) and Qorvo (QRVO) to NXP (NXPI) and Marvell Technology (MRVL) .
Elon Musk gives an incredibly rosy outlook for Chinese demand of Tesla (TSLA) cars and even does a jig, actual rapturous dance in Shanghai because he can't contain his excitement. Why bother to do so, he's going to be selling 150,000 cars this year from a factory that didn't exist a year ago. The stock's up 160% since June of last year.
The cloud kings continue their romp as one analyst after another makes their top picks. Salesforce (CRM) is up for a second day just on one of these nods.
We're get a big upgrade of Twitter (TWTR) and it sets the social media stocks on fire. Facebook's (FB) stock rallies once again.
Every single cybersecurity stock has been rocking because of the need to defend against an Iranian attack. Just today we got an upgrade of the ultimate laggard, FireEye (FEYE) .
I could go on and on. It's a veritable lollapalooza of tech and its been going on since the year begins.
Should we be shocked at this strength despite headlines that speak to the Iranians ready to wreak havoc of some sort against us for killing the number two leader from that country? Does that make sense given that there may be something looming, something imminent?
Let's just say history, at least under President Trump, says it's worth it to ride the wave. In 2017 the Nasdaq Composite gained 4.3% in January. In 2018 the Nasdaq soared 7.46%. And in 2019, despite a hideous preannouncement by Apple with a $7 billion shortfall led by China sales, the Nasdaq blasted to the moon, with a 9.7% increase. A tech guru might say that a horrendous miss by the world's largest tech company with tentacles everywhere, especially China, could be a worse case scenario.
The Nasdaq itself isn't the buy. There are way too many drug stocks in it and they are the exact opposite to the tech stocks I am talking about. These are safety last stocks.
And, it can be a short fuse. Back in February of 2018 you had a one-two punch of an economy that was too darned hot and a series of dangerous bets made against VIX volatility that blew to kingdom come.
It's important to recognize that you are not early this time around. Last year we had just come through the Powell bear market, precipitated by the Fed Chief taking rates up and talking about even more rate boosts in 2019. This time there is no springboard.
That said, the trends that are driving so much of this good new parade are real and they are long lasting. First, this is the year that 5G will take off and if you have a company with a decent amount of 5G exposure you will most likely have a winner. That means everything from the semis I mentioned all the way to Apple (AAPL) .
Second, digitization is still in its infancy in many industries. That's give you room to buy a Salesforce or Workday (WDAY) or a ServiceNow (NOW) or an Adobe (ADBE) into any weakness and do well for the rest of the month.
Third, there is a definitive shortage of social media stocks - Twitter, Facebook and Snap (SNAP) and that's about it. Advertising remains strong and may be growing even stronger. Don't forget Trade Desk (TTD) if you are inclined.
I know many people believe that we are reaching a point that you have to be a moron to buy anything right now. We have an unpredictable president who has provoked what the mainstream media portrays as a sleeping tiger that can and will strike at any minute. You have an impeachment hearing coming up and, historically, if you use the Clinton impeachment, we are in the worst possible moment where we will start reading about Republican Senate defections from the cause, as we did just this morning with the testimony of John Bolton, the former National Security adviser, and now no friend of Trump. You have an employment number Friday that could very well be too hot given the Fed's rate cutting.
But against all of these is hope, hope based on a stronger tech market and great secular growth trends that aren't contained by those negatives.
I read my Twitter feed. I see the critics saying I have grown too negative. As a promise to my eldest daughter I have become Jimmy Chill, I don't want to fight no more. But I will say this. I am not an Armageddonist even when you read the news stories about Iran's plans for us you could see why someone might want to join that camp. I am not a bear, the market's too resilient. I am not neutral, there are too many opportunities. I am simply respectful of the power of hope melded with the strength of so many parts of technology and I want to buy, not sell, these stocks when they get hammered.
(Nvidia, Lam Research, Marvell Technology, Salesforce, Facebook and Apple are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
