If you look at the nine SP500 sector exposure analysis we have recently been running, there are 3 things about Technology that I think are misunderstood:
1. Both the underlying XLK short interest and bottoms up stock short int is amongst the lowest of the 9 sectors
2. Valuation on NTM is the highest at 7.2x EBITDA
3. Sector Beta, for the 1st time in forever is very low in Tech at 0.93
In other words less shorts to squeeze, less incremental value to buy, and less juice on market up days (XLK is #6 out of 9 in terms of beta!... financials, discretionary, materials, and energy is where the traders get most of their rips).
We have recently announced that Rebecca Runkle has joined our team as head of Technology. Most of you will remember Rebecca from her days on the sell side at Morgan Stanley. With McGough, Penney, and Runkle we have taken a nice whack out of what used to make Morgan Stanley great.
RIMM’s 2008 stock price chart is a metaphor for the life of a reactive Wall Street crackberry addict falling out of favor. We’re looking forward to having Runkle’s experienced and patient point of view Captaining our Technology research effort.
They don’t trade Tech like they used to.
Keith R. McCullough
CEO & Chief Investment Officer