tl;dr
J. P. Morgan Strategist Nikolaos Panigirtzoglou expressed skepticism regarding the reinforcement of the shift from active to passive equity funds by the increasing concentration in the U.S. equity market. According to a J. P. Morgan Flows & Liquidity report, active equity mutual funds bore the brunt...
J. P. Morgan Strategist Nikolaos Panigirtzoglou expressed skepticism regarding the reinforcement of the shift from active to passive equity funds by the increasing concentration in the U.S. equity market. According to a J. P. Morgan Flows & Liquidity report, active equity mutual funds bore the brunt of equity fund selling in April, and the transition from active to passive funds continued. While active funds appeared to be underweight on the Magnificent Seven stocks, including Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla, they outperformed their benchmark in 2023 and year-to-date, Panigirtzoglou noted. Panigirtzoglou also mentioned that there is little evidence of the active to passive shift accelerating in terms of assets under management, and the significance of the SEC diversification rule may not be as critical as initially perceived. The notion that the shift from active to passive funds is reinforced by U.S. equity concentration and the rise of the Magnificent Seven stems from active equity managers' struggle to keep pace with the increasing prominence of U.S. large tech stocks, the SEC diversification rules, and/or their own stock or sector limits. Panigirtzoglou elaborated that the flow shift creates a self-reinforcing cycle, where more money flows into passive equity funds, ultimately ending up in large tech stocks, thereby expanding them further and increasing their weight in equity indices. However, despite the perception of large tech companies as "defensives," their earnings as a percentage of total S&P earnings display cyclicality. Additionally, there have been no market concentration peaks beyond those observed after the Covid-19 pandemic. Notably, there was a 26% overall allocation for active funds compared to 29% for passive funds, and active funds have slightly outperformed passive funds year-to-date. While there has been an acceleration in the outflow from active funds in nominal terms, Panigirtzoglou clarified that this is largely due to a price effect, with the outflows relative to assets under management being similar in magnitude in recent years. Regarding the SEC diversification rule, up to 25% of fund assets can be held as large holdings, allowing room for active funds to have exposures exceeding 5%, such as with Microsoft, Apple, and Nvidia. Active funds are experiencing outflows as part of the shift from active to passive, and Panigirtzoglou suggested that they may sell other stocks to return cash to investors and passively increase their exposure to the Magnificent Seven stocks beyond the specified thresholds.
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More about Amazon.com Inc
Amazon.com Inc
Amazon.com, Inc. is an American multinational technology company which focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence. It is one of the Big Five companies in the U.S. information technology industry, along with Google, Apple, Microsoft, and Facebook. The company has been referred to as one of the most influential economic and cultural forces in the world, as well as the world's most valuable brand.
Industry: TRADE & SERVICES
Sector: RETAIL-CATALOG & MAIL-ORDER HOUSES
Market Cap: 1,922,307,064,000
PE Ratio: 51.74
Dividend Yield: None
Beta: 3.57
EPS: 57.13
Volatility: 0.0638
Volume: 590,739,997,000
Stock Price: $220.29
Revenue: 2.167 billion
Net Income: 0.125 billion
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Alphabet Inc Class A Summary
Alphabet Inc. is an American multinational conglomerate headquartered in Mountain View, California. It was created through a restructuring of Google on October 2, 2015, and became the parent company of Google and several former Google subsidiaries. The two co-founders of Google remained as controlling shareholders, board members, and employees at Alphabet. Alphabet is the world's fourth-largest technology company by revenue and one of the world's most valuable companies.
Key Information:
Sector: Technology
Services: Computer Programming, Data Processing, etc.
Market Cap: $2.07 trillion
PE Ratio: 25.56
Dividend Yield: None
Beta: 0.259
Market Cap (intraday): $318.15 billion
EPS: $189.06
Forward PE Ratio: 0.609
PEG Ratio: 0.154
More about Meta Platforms Inc.
Meta Platforms Inc. (formerly known as Facebook, Inc.) operates in the technology and services-computer programming, data processing, etc. sector. The company has a market capitalization of approximately $1.12 trillion, with a current stock price of $25.44. Over the past year, the stock has demonstrated a 0.5% increase, with a 17.36% volatility. The Relative Strength Index (RSI) stands at 55.67, indicating a neutral position. The trading volume over the last 50 days has been approximately 142,711,996 shares. The stock's 50-day moving average is at $515.33, with a standard deviation of 1.141. The Bollinger Bands show a volatility of 0.273.
More about Microsoft Corporation
Microsoft Corporation is an American multinational technology company. It is a leading producer of computer software, consumer electronics, personal computers, and related services.
Its notable software products include the Microsoft Windows line of operating systems, the Microsoft Office suite, and the Internet Explorer and Edge web browsers. The company's flagship hardware products encompass the Xbox video game consoles and the Microsoft Surface lineup of touchscreen personal computers.
In the 2020 Fortune 500 rankings, Microsoft secured the 21st position among the largest United States corporations by total revenue. As of 2016, it held the distinction of being the world's largest software maker by revenue. Microsoft is recognized as one of the Big Five companies in the U.S. information technology industry, alongside Google, Apple, Amazon, and Facebook.
Sector: Technology
Industry: Services-Prepackaged Software
Market Cap: 295.69 Billion
Price: $34.47
Change: $2.93
Change %: 11.54%
PE Ratio: 31.83
Volume: 0.364
Revenue: 236.58 Billion
Gross Margin: 469.4
EBITDA: 0.2
Net Income Avl to Common: 0.17
More about NVIDIA Corporation
NVIDIA Corporation is an American multinational technology company incorporated in Delaware and based in Santa Clara, California. It designs graphics processing units (GPUs) for the gaming and professional markets, as well as system on a chip units (SoCs) for the mobile computing and automotive market.
Industry: MANUFACTURING, SEMICONDUCTORS & RELATED DEVICES
Market Cap: 214.54 billion
Current Price: $71.93
Change: $0.16
Percentage Change: 11.93%
52-Week Range: $24.68 - $0.488
Volume: 60,921,999
Average Volume: 1008.9
EPS: 7.61
P/E Ratio: 2.653
More about Tesla Inc
Tesla Inc
Tesla, Inc. is an American electric vehicle and clean energy company based in Palo Alto, California. Tesla's current products include electric cars, battery energy storage from home to grid-scale, solar panels and solar roof tiles, as well as other related products and services. In 2020, Tesla had the highest sales in the plug-in and battery electric passenger car segments, capturing 16% of the plug-in market (which includes plug-in hybrids) and 23% of the battery-electric (purely electric) market. Through its subsidiary Tesla Energy, the company develops and is a major installer of solar photovoltaic energy generation systems in the United States. Tesla Energy is also one of the largest global suppliers of battery energy storage systems, with 3 GWh of battery storage supplied in 2020.
Manufacturing Statistics
Industry: Motor Vehicles & Passenger Car Bodies
Revenue: $574,087,823,000
Profit Margin: 46.04%
Dividend: None
Debt-to-Equity Ratio: 3.91
Return on Equity: 29.8%
Price-to-Earnings Ratio: 0.144
Market Cap: $94,745,002,000
Stock Price: $178.29
Change: -0.534%
Change in Price: -$0.87
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