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When it comes to stocks, not all boats float as one, the Tech Sector is arguably the most stock-specific group when it comes to relative performance. Depending on how you play with the numbers, almost 60% of the US S&P500’s gain through 2023 has been generated by the “Magnificent Seven” – incredibly just seven stocks have largely carried 500, i.e. Alphabet (GOOGL US), Amazon (AMZN US), Apple (AAPL US), Meta Platforms (META US), Microsoft (MSFT US), Nvidia (NVDA US) and Tesla (TSLA US). Locally, we don’t yet have any tech giants, but we’ve still witnessed a strong 2023, with the sector up +25% year-to-date while the ASX200 has advanced less than 3%.
- Although MM is looking for lower bond yields through 2024, we believe stretched valuations will temper the tech stocks’ performance moving into next year.
However, it was business as usual on Tuesday, with the ASX200 Tech Sector leading the market’s advance, finally closing up +2.21%. What caught our attention was the strong performance by Xero (XRO), which rallied up almost +5% from its intra-day low – a classic case of a relatively illiquid stock squeezing higher into Christmas on a lack of selling. We hold tech names Xero (XRO) and Altium (ALU) in our Active Growth Portfolio, and both appeared to have shown their hand of late, advancing strongly from their November lows.
- Our “best guess” is ALU posts a new all-time high around $50 and XRO squeezes back towards the $115 level – both 6-8% higher.
MM is long and bullish XRO short-term
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The ASX200 added to December’s gains on Tuesday, taking it up more than 2%, and we still have more than half of the month left. As we’ve said a few times of late, as we head into the seasonally strong fortnight for stocks, the index is looking good for at least a retest of the 7400-7450 area. The broad market was again firm on Tuesday, with no sectors falling and over 70% of the main board ending the session higher. Apart from the strong performance of the tech names, the influential banks and major miners have remained firm over recent weeks, adding some backbone to the end-of-year rally, which feels like it is gathering momentum with only 12 days remaining until Christmas.
- This morning, the SPI Futures are pointing to a flat opening with a ~20c fall by BHP Group (BHP) in the US, offsetting gains on Wall Street.
MM remains cautiously bullish toward the ASX200 short-term
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