Shanghai, July 16 (Xinhua) -- Since the beginning of this year, the frequent record highs of the "seven tech giants" in the US stock market have become the focus of market attention. Recently, as the trend of tech giants gradually weakens, the stock price of Berkshire Hathaway Group, owned by "stock god" Warren Buffett, is also breaking historical highs.
Overnight, Berkshire Hathaway's A-class stock price closed up 2.11% to $652997, rising for the fifth consecutive trading day and surpassing the historical high of $647039 set in February this year. Analysts generally believe that the recent continuous rise in Berkshire Hathaway's stock price reflects that the focus of the US stock market may be gradually shifting from technology stocks to value stocks.
Wellington Investment Management's global investment and multi asset strategist Nanette Abuhoff Jacobson and investment strategy analyst Karoline Klimova told Xinhua Finance that value stocks will perform well in the next three to five years, as structural inflation and rising real interest rates will contribute to the trend of US value stocks. After experiencing a long-term rebound in growth stocks, investors should pay more attention to the balance of their asset portfolio.
Is the wave of technology stocks gradually coming to an end?
According to the weekly market liquidity report recently released by Goldman Sachs Prime Brokerage, 7 out of 11 sectors in the S&P 500 index experienced net outflows last week, mainly concentrated in information technology, communication services, and essential consumer goods sectors, while cyclical stocks such as non essential consumer goods, energy, utilities, and real estate saw net purchases of funds.
Goldman Sachs reported that hedge funds have sold net information technology and communication services (TMT) stocks for four consecutive weeks.
Morgan Stanley also stated in its latest report that as technology stocks experienced widespread selling, global hedge fund exposure to US software stocks hit a multi-year low last week. Among them, software stocks are the stocks with the highest net sales, which continues the net selling trend in the field since the end of April and lowers the risk exposure to a new low in many years
With the release of the second quarter report of the US stock market approaching, whether the performance of technology giants with high valuations hitting high expectations can match market expectations has become the key to future trends.
Bank of America Merrill Lynch predicts in a recent research report that 493 companies in the S&P 500, except for the "Big Seven" in technology stocks, are expected to break the trend of slowing profit growth in the past five quarters, and the profit growth of the "Big Seven" may slow down for the second consecutive quarter.
Tajinder Dhillon, Senior Research Analyst at the London Stock Exchange, stated that in the first quarter, the profits of the "Big Seven Technology Stocks" increased by 51.8% year-on-year, while the profits of other sectors in the S&P 500 index only increased by 1.3% year-on-year. The gap in the second quarter is expected to narrow, with the seven giants' profits growing by 29.7% and other sectors growing by 7.2%.
Liz Ann Sonders, Chief Investment Strategist at Jiaxin Wealth Management, also stated that there is still significant uncertainty about how the profitability of tech giants matches current valuation levels, but it is clear that the market has high profit expectations for these companies.
Has high dividend value stocks become a "hot commodity"?
The cycle of market sentiment cannot be avoided even by "AI leading stocks". As technology stocks led by Nvidia stagnate, funds may gradually shift towards value stocks.
From the trends of the S&P 500 Value Index and the Russell 1000 Value Index, it can be seen that in the first half of this year, value stocks continued to adjust sideways, but in the past week, their gains have both reached 3%.
Berkshire Hathaway is clearly the representative of value stocks and also the largest component of the two major index ETFs mentioned above.
Jason Pride, head of investment strategy and research at Glenmede, believes that the valuations of growth stocks have been hovering at high levels this year, while the valuations of value stocks are currently relatively more reasonable.
At the same time, value stocks may provide investors with high dividends in the next stage, so high-quality, high dividend value stocks may become the market's future choice.
Savita Subramanian, head of US equity and quantitative strategy at Bank of America Merrill Lynch, believes that the reasons for investors to increase their investment in cyclical industry value stocks have now become more compelling. Considering the macro environment, it will be the large cap value stocks that will lead the stock market to rise in the coming years
Regulatory documents show that since the beginning of this year, Berkshire Hathaway has reduced its holdings in technology stocks and increased its holdings in energy and insurance. In June, Berkshire Hathaway has purchased Western Petroleum stocks for nine consecutive trading days, with its latest shareholding ratio reaching nearly 29%.
Buffett stated that Berkshire Hathaway is particularly optimistic about Western oil companies' large holdings of oil and gas in the United States, as well as their leading position in carbon capture.
Wellington Investment Management explains that value stocks are typically concentrated in mature cyclical industries such as finance, energy, materials, and industry. These industries often have the characteristics of low P/E ratios, stable cash flows, low growth rates, and high dividend yields. On the contrary, growth stocks are often linked to industries that are considered innovative or disruptive, such as technology, healthcare, and non essential consumer goods, which often have higher P/E ratios.
Over time, value stocks become more diversified and diversified than growth stocks, while growth stocks become more concentrated. Wellington Investments believes that compared to growth stocks, value stocks will continue to exhibit a broader trend of industry diversification.
Wellington Investment Management stated that the performance of value stocks may not necessarily be synchronized with the economic cycle, and in the coming years, structural inflation and rising real interest rates will contribute to the development of value stocks. After experiencing a long-term rebound in growth stocks, investors should pay more attention to the balance of their asset portfolio.