by Bespoke Investment Group
Hewlett-Packard (HPQ), Cisco (CSCO), Intel (INTC), Microsoft (MSFT), and IBM. Aside from IBM, can you think of a bigger group of Tech duds lately? Intel can't get above $22/share to save its life, Microsoft has been stuck in the $20s for a decade, Cisco has had four consecutive awful earnings reports, and HPQ lost 10% of its value today alone.
The reason we're isolating these five tech stocks is because they're the five tech stocks currently in the Dow Jones Industrial Average. Back in the day (the 90s), these names were high flyers, but because of their recent performance, we're now labeling them the Tech Dogs of the Dow.
Below are two charts comparing the performance of the Tech Dogs to the Nasdaq 100 and the Nasdaq Composite. As shown, from 1990 to the market peak in early 2000, the Tech Dogs soared 7,200%, blowing away the Nasdaq 100 and Nasdaq Composite. If we chart the performance of the Tech Dogs versus the two Nasdaq indices during the current bull market, however, a different picture emerges. As shown in the second chart below, the Tech Dogs are up 72%, while the Nasdaq 100 and Nasdaq Composite are both up about 120%. While the Tech Dogs traded right inline with the two Nasdaq indices during the first half of the current bull, they have recently lagged significantly. While the Nasdaq 100 is up more than 30% since last July, the Tech Dogs are flat.
The tech sector has been one of the drivers of the market during the current bull. It has helped propel the Nasdaq 100 back above its 2007 highs, which is an impressive feat given how far we dropped during the financial crisis. If only the Dow Jones Industrial Average had a different representation of names from the tech sector, we may be saying the same for that index as well.
So now what? Should the Dow drop a few of the five Tech Dogs from the index and replace them with some "new tech" names, or can these old Tech Dogs learn some new tricks and finally go up again?
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