Author Topic: Favoring tech stocks over total market  (Read 5847 times)

DadJokes

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Favoring tech stocks over total market
« on: August 26, 2020, 07:20:33 AM »
Since starting on the FI path back in Dec 2018, I've been exclusively in S&P 500 or total stock market index funds.

A little over a month ago, I decided that I would experiment with a portion of my portfolio and put it in a tech stock fund. I think it'll be fun to keep up with this portion of my portfolio and how it would have performed differently if I left it in a broad-based index fund.

7/22/20 - sold 131.667 shares of VTI for $21,441.50 ($162.85/share)
7/22/20 - bought 74 shares of VGT for $21,158.45 ($285.93/share)
7/28/20 - bought 1 share of VGT for $280.16 ($280.16/share)

Current values:
VTI: $174.45/share * 131.667 shares = $22,969.31
VGT: $317.65/share *75 shares = $23,823.75

Not exactly a wall street bets gamble, but that's as much as my risk tolerance will allow.

Car Jack

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Re: Favoring tech stocks over total market
« Reply #1 on: August 26, 2020, 07:49:26 AM »
The question to ask yourself is this:  What do you know that the market doesn't know.  In 100% of the time, the answer is either "nothing" or it's "I'm about to do insider trading and Federal prison sounds great".

Investing is boring.  If you want it to be less boring, you could do what I do.  I have a manual excel spread sheet and during the day, I check my Schwab, TDAmeritrade, eTrade and Fidelity accounts and update the numbers.  I look at my box for "$ until $3MM" and my asset allocation percentages.  Then I go back to work.


sixwings

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Re: Favoring tech stocks over total market
« Reply #2 on: August 26, 2020, 09:18:00 AM »
About 15% of my portfolio is VGT, the rest are broad based index funds. Tech isn't going away and I think it will be the main driver of the global economy for the future, but there is potential that some of the big tech co's could get broken up or something. At any rate, I like having an additional tech focus in my portfolio while still focused on more broad based index funds.

I have 75% in a global asset allocation etf (US, Canada, Europe, Asia, developing markets), 15% in VGT, 10% in S&P500. I would like more VGT but my wife prefers the global diversification and S&P500 is pretty tech heavy. Overall I really like my allocation.

GreenEggs

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Re: Favoring tech stocks over total market
« Reply #3 on: August 26, 2020, 08:28:18 PM »
I had the bulk of my assets in VTI too and recently decided to look at other funds. 


VGT was the first one that I decided to try.  Here's a list of some others that I'm trying: MGK, QQQ, TAN. 


I also am trying some of ARK Funds actively managed ETFs; ARKW, ARKK, ARKF, ARKG, & ARKQ.  The expense ratios of 0.75% are a good bit higher than index based funds since they're actively managed, but they seem to earn their fees.


It's impressive & fun to backtest all of these with [size=78%]https://www.portfoliovisualizer.com/backtest-portfolio#analysisResults[/size] to see how much we "could have made". 


I know that there are no guarantees...


bermudasq

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Re: Favoring tech stocks over total market
« Reply #4 on: August 27, 2020, 01:38:28 PM »
VGT was the first one that I decided to try.  Here's a list of some others that I'm trying: MGK, QQQ, TAN. 

Consider CQQQ

greentea

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Re: Favoring tech stocks over total market
« Reply #5 on: August 28, 2020, 02:30:48 AM »
I would recommend OGIG instead of VGT.

OGIG like VGT is a passive fund with low fees. However it differs in that it includes more global companies including ZM and SHOP which have done very well since 23 March 2020, I like this better than what what VGT is doing. Its YTD performance is twice that of VGT.

I have recently sold 2 tech unit trust to buy both OGIC and ARKK or ARKW. My friends think I have lost my marbles because I will be buying these at a high price, but to me I am just switching to optimize both costs and performance of the long term portion of the portfolio.

Edited a typo error.
« Last Edit: August 28, 2020, 08:46:47 AM by greentea »

GreenEggs

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Re: Favoring tech stocks over total market
« Reply #6 on: August 28, 2020, 08:30:43 AM »
I would recommend OGIG instead of VGT.

OGIG like VGT is a passive fund with low fees. However it differs in that it includes more global companies including ZM and SHOP which have done very well since 23 March 2020, I like this better than what what VGT is doing. Its YTD performance is twice that of VGT.

I have recently sold 2 tech unit trust to buy both OGIC and ARKK or ARKW. My friend think I have lost my marbles because I will be buying these at a high price, but to me I am just switching to optimize both costs and performance of the long term portion of the portfolio.




I agree, OGIG is a high performing ETF that is worth considering.  Its E/R is 0.48%, which is much lower that ARK funds which are 0.75%, but much higher than VGT which is 0.10%.   


I visited their website & saw that the fund follows the "OGIG index".  I couldn't determine if it's actively or passively managed.  It holds quite a bit of foreign stocks, about 38%, with about 25% being Chinese. 

hodedofome

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Re: Favoring tech stocks over total market
« Reply #7 on: August 28, 2020, 09:11:18 AM »
100% of my net worth outside of my house (house is only about 13% of my net worth) is in tech stocks. And during the covid crash I even leveraged up and bought TQQQ (triple leveraged Nasdaq) but I've since sold the leveraged fund last week and put the money back into software stocks.

Tech has been leading and will continue to lead until the next bubble pops, which could be a little while.

park10

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Re: Favoring tech stocks over total market
« Reply #8 on: August 30, 2020, 11:35:58 AM »
100% of my net worth outside of my house (house is only about 13% of my net worth) is in tech stocks. And during the covid crash I even leveraged up and bought TQQQ (triple leveraged Nasdaq) but I've since sold the leveraged fund last week and put the money back into software stocks.

Tech has been leading and will continue to lead until the next bubble pops, which could be a little while.
Phenomenal ! I believe everyone who did not take advantage of December 2018 (Christmas Eve) and late March 2020 lows to get in Leveraged etf's ($TQQQ and $UPRO) wish they had.. These emotional overreactions do not come about often and as individual investors we Have to take advantage of them.. Use margin as much as you can.. Also can place a 7 % stop loss to manage risk...I did that but obviously wish I had put in Lot more...Who knows when we will get another opportunity like this again.....

On another note, Vanguard boggleheads has a very long thread(s) on a simple 55% $UPRO and 45% Cash asset allocation...Cash is Only used to buy more $UPRO during pullbacks (some will be pretty nasty), but over time the results have been stunning. Obviously this works better when you are few years away from retirement.

MustacheAndaHalf

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Re: Favoring tech stocks over total market
« Reply #9 on: September 03, 2020, 09:20:53 PM »
In March I bought individual stocks that had been beaten down, and have no regrets favoring those over tech stocks.  I say that knowing VGT has gone up +70% since March 20, 2020.  One of the stocks I picked for my experiment, Dine Brands (DIN), has gone up +265% since March 20, 2020.  Even the laggard of my experiment, Macy's, has gone up +111% since Mar 20.

Looking at Yahoo Finance, VTI's assets divided by the assets that trade each day (price x avg volume) is a ratio of about 1500:1, while for VGT that ratio is 130:1 - an order of magnitude greater.  Maybe that shows people are favoring tech over the total market, at least in Vanguard ETFs.

park10 - If you're talking about the thread by HEDGEFUNDIE, that used to be 55% UPRO / 45% TMF (rather than cash).  Has that changed?  Long-term bonds and the S&P 500 are negatively correlated, which was part of the reason the thread author went 3X leverage in S&P 500 (UPRO) and long-term bonds (TMF).

MustacheAndaHalf

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Re: Favoring tech stocks over total market
« Reply #10 on: September 04, 2020, 05:43:20 AM »
On Thursday, Apple stock lead the tech stock decline by dropping 8%.

"Strategists said there was no particular catalyst, but froth had been building in those groups, and they had been caught up in a speculative frenzy that extended to the options market."
https://www.cnbc.com/2020/09/03/tech-led-sell-off-is-part-of-a-healthy-correction-as-it-blows-off-some-excessive-speculation.html

Lots of people are investing in tech stocks, which pushes up the price until the buying pressure ends.  If CNBC has it right, the decline should continue today as investors realize tech stocks have too many buyers.  If it's really "froth" that has been building, shouldn't the sell off continue?

Yesterday, not co-incidentally, the CDC instructed states to prepare to distribute vaccine on Nov 1 2020.  That's the first time we've heard such a specific date for vaccines to be available, and Covid sensitive stocks made gains (Macy's +8%, Carnival Cruises +5%) despite the overall US stock market declining 3.5%.  I think that's the actual cause of the tech sell off: stay at home stocks are seeing the end of their advantage arriving sooner than expected.

With malls closed, Amazon (-5%) gains customers.  But when vaccines end the current situation, people won't watch Netflix (-5%) as often.  So I view yesterday as pricing in a possible earlier date for the end of Covid-19.  Because that data is now priced in, I don't expect further drops today.  But if I'm right, there will be more drops of tech stocks in the months ahead, each time positive news of a vaccine emerges.

sixwings

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Re: Favoring tech stocks over total market
« Reply #11 on: September 04, 2020, 01:39:11 PM »
I don't think people will stop using amazing or netflix once a vaccine is in place. People have already made the switch, it's unlikely someone will go from having stuff dropped off at the door to going back to malls. I think this is likely to be a K shaped recovery, a few (tech stocks, amazon, etc.) will continue to gain ground as harder to reach users were forced to start using, and the others will continue to drop. Other retailers going bankrupt just drives more market share for Amazon.

MustacheAndaHalf

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Re: Favoring tech stocks over total market
« Reply #12 on: September 04, 2020, 11:38:04 PM »
Using Amazon and Netflix aren't all or nothing decisions.  Some people forced to use those services will return to their old habits when they can.  Others will keep using them.  But the most unlikely scenario is nobody abandoning Amazon or Netflix once alternatives are available.  I would say tech stocks have already recovered, so mention of a recovery really refers to the stock of other companies.

Macy's stock went up +11% during Sept 3, and kept most of that gain.  That same day, Carnival Cruises spiked up +12%, dropped back down, but has also retained most of that gain.  Numerous times since March, I've seen the most battered stocks spike upwards on positive news for an economic reopening - especially vaccine news.  For beaten down stocks like these, the recovery will be very dramatic.

Does "K shaped recovery" include those stocks?  I thought it meant mom and pop restaurants would struggle, and unemployment would remain higher.  So far, bankruptcies have been mostly in companies that were already struggling before corona virus.  Hertz hadn't made a profit in years, for example.

hodedofome

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Re: Favoring tech stocks over total market
« Reply #13 on: September 06, 2020, 11:10:30 AM »
In March I bought individual stocks that had been beaten down, and have no regrets favoring those over tech stocks.  I say that knowing VGT has gone up +70% since March 20, 2020.  One of the stocks I picked for my experiment, Dine Brands (DIN), has gone up +265% since March 20, 2020.  Even the laggard of my experiment, Macy's, has gone up +111% since Mar 20.

Looking at Yahoo Finance, VTI's assets divided by the assets that trade each day (price x avg volume) is a ratio of about 1500:1, while for VGT that ratio is 130:1 - an order of magnitude greater.  Maybe that shows people are favoring tech over the total market, at least in Vanguard ETFs.

park10 - If you're talking about the thread by HEDGEFUNDIE, that used to be 55% UPRO / 45% TMF (rather than cash).  Has that changed?  Long-term bonds and the S&P 500 are negatively correlated, which was part of the reason the thread author went 3X leverage in S&P 500 (UPRO) and long-term bonds (TMF).

My small Roth IRA (about $50k) has been in 50/50 SPXL/TMF for several years now. Itís remarkably consistent 20%+ returns each year. Even during Covid craziness I donít think it was negative for the year. In April I switched it to 75/25 SPXL/TMF as I felt it was pretty safe to be heavy stocks for a while. I should probably put that back to 50/50 soon.

I know I said 100% of my net worth was tech stocks, I forgot about this account.

Indexer

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Re: Favoring tech stocks over total market
« Reply #14 on: September 06, 2020, 11:27:40 AM »
Do you think tech, what we currently consider the most innovative sector, will always be the fastest growing?

Largest market cap by year:

1960: AT&T
1970: IBM
1980: IBM
1990: Exxon
2000: Microsoft
2010: Exxon
2020: Apple (but Microsoft or Amazon could steal by year end).

Very often the biggest company was one of the most innovative of it's time. That would be true for AT&T, IBM, and Microsoft, but they were each eventually replaced, sometimes by a company that drills holes in the ground(Exxon).

Who will be the biggest company in 2030? I don't know, and the information I have tells me it's just as likely not to be the current largest as it is to be.

MustacheAndaHalf

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Re: Favoring tech stocks over total market
« Reply #15 on: September 06, 2020, 10:55:57 PM »
@hodedofome - UPRO has a 0.92% expense ratio compared to SPXL at 1.01%, so you might save some money by switching.  Morningstar shows UPRO's 5 year average performance as +0.27% higher than SPXL, so there might be something else going on besides the 0.10% expense ratio difference.

There's a chance I stumble into a lucky combination: I invest in Covid sensitive stocks now (cruise lines, airlines, retail, restaurants, etc), and wait for them to recover.  The more effective the vaccine, the more those businesses can get back to normal.  Meanwhile, many people are chasing tech stock performance.  Tech stocks mostly benefited from the lack of competition during lock down.  In a recovery, those stocks could drop simply to reflect they have competition again.  So I might see my stock/option picks head sharply upwards, and when I sell, maybe I'll be able to buy some tech stocks at a discount.



Indexer -  I see the pattern!  :)  In 2030 it's Exxon!  Well, I'm partly joking - but Exxon lost -40% year to date, and has a +1% per year performance over 10 years.  With value stocks historically far apart from growth, and oil prices near historic lows, it seems more likely those trends reverse rather than continue.  And if nothing else, I expect a recovery from corona virus in months or years, at which point oil demand recovers (accurate, immediate Covid tests could do the same for travel).

Indexer

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Re: Favoring tech stocks over total market
« Reply #16 on: September 07, 2020, 02:24:20 PM »
Indexer -  I see the pattern!  :)  In 2030 it's Exxon!  Well, I'm partly joking - but Exxon lost -40% year to date, and has a +1% per year performance over 10 years.  With value stocks historically far apart from growth, and oil prices near historic lows, it seems more likely those trends reverse rather than continue.  And if nothing else, I expect a recovery from corona virus in months or years, at which point oil demand recovers (accurate, immediate Covid tests could do the same for travel).

Haha, true, probably not Exxon. Current tech companies could be replaced by a newer tech, like IBM replaced AT&T, and Microsoft replaced IBM. Or we could find ourselves so dependent on a commodity that the company mining that commodity becomes #1. It doesn't have to be oil again. It could be something needed for electric car batteries, or a treatment for Covid. Who knows?

Paul der Krake

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Re: Favoring tech stocks over total market
« Reply #17 on: September 07, 2020, 03:16:57 PM »
The tech industry at large needs to show some real advancement in conquering a new industry in order to justify these lofty valuations. There is only so much ad and cloud money available for them to gobble up.

Whether thatís health, transportation, energy, banking, or something else entirely, I donít know.

It seems to me that the markets have been pricing in these conquered industries before the conquering actually taking place. Yes all the big guys have initiatives in those new markets, are showing potential, but no real breakthroughs yet.

DadJokes

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Re: Favoring tech stocks over total market
« Reply #18 on: October 12, 2020, 09:09:32 AM »
7/22/20 - sold 131.667 shares of VTI for $21,441.50 ($162.85/share)
7/22/20 - bought 74 shares of VGT for $21,158.45 ($285.93/share)
7/28/20 - bought 1 share of VGT for $280.16 ($280.16/share)

Current values:
VTI: $174.45/share * 131.667 shares = $22,969.31
VGT: $317.65/share *75 shares = $23,823.75

Updated values:
VTI: $179.22/share * 131.667 shares = $23,597.36 (2.73% gain since last update, 10.05% total)
VGT: $328.68/share * 75 shares = $24,651 (3.47% gain since last update, 14.98% total)

EricEng

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Re: Favoring tech stocks over total market
« Reply #19 on: October 12, 2020, 02:52:35 PM »
The question to ask yourself is this:  What do you know that the market doesn't know.  In 100% of the time, the answer is either "nothing" or it's "I'm about to do insider trading and Federal prison sounds great".
Not actually accurate.  I was able to make multiple very successful tech bets based on my experience and knowledge in the industry working at a large megaco that was not "insider trading", but required technical experience that the finance guys would not be aware of.  Just watch what your big company is buying and judge whether you have a good experience with the product yourself.

Case in point:
#1 Bought Nvidia at $19 a share (now over $500 with a sweet 2,950% return) 5 years ago because I saw how dominate their cards were becoming on the gaming market (we used them for flight sims), how much larger the performance improvements were generation to generation compared to the past, machine learning apps, and of course at the time coin mining.  Also because everywhere we tried to buy them was always sold out.  Finance guys didn't monitor Newegg much I suspect, although probably do now.
#2 Bought AMD at $20 a share (now over $80) 1 year ago because I saw how their cpus were just destroying intel in performance while remaining bargain priced.  All the youtube tech guys were raving over these for months (Linus tech tips, etc) before finance guys realized how AMD was taking off.
#3 Bought Activision Blizzard at $48 a share (now over $80) 1 year ago because I saw how successful and popular their WoW legacy was.  I read lots of video gaming sites and didn't need to wait for quarterly financial results to tell me their profits were about to go way up.
#4 Bought Palo Alto stock at ~$150 a share in 2018 (over $250 now although I reallocated it at $225 early this year) 2 years ago because I noticed MegaCo was buying their firewalls and network equipment a lot.  Their product seemed significantly superior to competition.  Sure enough, that showed up in stock results a few months later.

If you have a passion in an obscure but large industry and a good pulse on certain sector, you'll notice a trend before it works up to the finance guys via quarterly financial reports.   

hodedofome

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Re: Favoring tech stocks over total market
« Reply #20 on: October 24, 2020, 03:26:18 PM »
The question to ask yourself is this:  What do you know that the market doesn't know.  In 100% of the time, the answer is either "nothing" or it's "I'm about to do insider trading and Federal prison sounds great".
Not actually accurate.  I was able to make multiple very successful tech bets based on my experience and knowledge in the industry working at a large megaco that was not "insider trading", but required technical experience that the finance guys would not be aware of.  Just watch what your big company is buying and judge whether you have a good experience with the product yourself.

Case in point:
#1 Bought Nvidia at $19 a share (now over $500 with a sweet 2,950% return) 5 years ago because I saw how dominate their cards were becoming on the gaming market (we used them for flight sims), how much larger the performance improvements were generation to generation compared to the past, machine learning apps, and of course at the time coin mining.  Also because everywhere we tried to buy them was always sold out.  Finance guys didn't monitor Newegg much I suspect, although probably do now.
#2 Bought AMD at $20 a share (now over $80) 1 year ago because I saw how their cpus were just destroying intel in performance while remaining bargain priced.  All the youtube tech guys were raving over these for months (Linus tech tips, etc) before finance guys realized how AMD was taking off.
#3 Bought Activision Blizzard at $48 a share (now over $80) 1 year ago because I saw how successful and popular their WoW legacy was.  I read lots of video gaming sites and didn't need to wait for quarterly financial results to tell me their profits were about to go way up.
#4 Bought Palo Alto stock at ~$150 a share in 2018 (over $250 now although I reallocated it at $225 early this year) 2 years ago because I noticed MegaCo was buying their firewalls and network equipment a lot.  Their product seemed significantly superior to competition.  Sure enough, that showed up in stock results a few months later.

If you have a passion in an obscure but large industry and a good pulse on certain sector, you'll notice a trend before it works up to the finance guys via quarterly financial reports.

NVDA and AMD fine, switch the Palo Alto for CRWD, OKTA, ZS, NET and FSLY. Itís all about the cloud now and physical devices like firewalls matter less and less. Security is moving to cloud platforms and zero trust over locally hosted apps.

MustacheAndaHalf

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Re: Favoring tech stocks over total market
« Reply #21 on: October 28, 2020, 08:42:50 AM »
hodedofome - Big tech companies are certainly focused on cloud (Amazon, Microsoft and Google), so it makes sense as a future direction.  But most of your stock picks are companies that have only been public a couple years.  That seems higher risk - how do you avoid picking a company that goes nowhere?

hodedofome

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Re: Favoring tech stocks over total market
« Reply #22 on: October 30, 2020, 12:21:45 PM »
hodedofome - Big tech companies are certainly focused on cloud (Amazon, Microsoft and Google), so it makes sense as a future direction.  But most of your stock picks are companies that have only been public a couple years.  That seems higher risk - how do you avoid picking a company that goes nowhere?

Only thing I can tell you is to work in the tech industry and be an expert at who the winners and losers are. I've worked in tech since 2005, so it's easy for me to see where the industry is headed and who's going to be leading it. Someone from the outside, yeah it would be tough.

Those who are leading: cloud first companies, products that are native to the cloud, companies in Silicon Valley (for the most part), companies with founding CEO's and engineer CEO's. Leading companies which are taking market share and creating the cloud and digital future (today) are AMZN, AAPL, NFLX, MSFT, GOOGL, TSLA, NVDA, SQ, SHOP, RNG, BILL, COUP, ZM, DOCU, AVLR, WORK, OKTA, HUBS, ZEN, TWLO, FSLY, NET, DDOG, TTD, CRWD, CRM, ADBE, MDB, NOW, TEAM, VEEV, ZS, WIX, SNOW. Most of these stocks are pretty pricey right now, so the best time to buy them is after they are down a good bit, not after they've doubled in price in a few months...

Those who are getting left behind: old tech that's holding onto the hold ways (Cisco, IBM, SAP, Sage, VMware, etc), on premise products (Cisco phone systems, Sage 50, Sage 100, Sage 300, Sage 500, Sage Abra HR, Microsoft Dynamics GP/AX/NAV, Quickbooks Desktop, and many others), companies focused on hardware (Dell, HP, Lenovo, etc).

One simple way to find the companies who are winning from the ones who are losing, is look at revenue growth. The ones who are winning are growing revenues at 30-100%+ per year. The ones who are losing have no revenue growth or are shrinking. In tech, you're either winning or dying. It's a constantly disruptive segment. If you get comfortable, you're done.
« Last Edit: October 30, 2020, 12:23:38 PM by hodedofome »

MustacheAndaHalf

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Re: Favoring tech stocks over total market
« Reply #23 on: October 31, 2020, 11:12:38 PM »
I found four cloud ETFs that overlap your list to varying degrees:
WCLD (+70% YTD, 0.45% fee, 55 stocks ... 3 biggest: ZM, PLAN, CRWD)
CLOU (+54% YTD, 0.68% fee, 37 stocks ... 3 biggest: ZM, TWLO, ZS)
SKYY (+28% YTD, 0.60% fee, 64 stocks ... 3 biggest: ORCL, BABA, VMW)
IVES (+13% YTD, 0.68% fee, 65 stocks ... 3 biggest: GDS, ESTC, KC)

Zoom (ZM) grew by over 600% year to date, which may be why it's the #1 holding in the top performing ETFs, above.  The pandemic has required online services scale up, which means more business for cloud companies.  I expect vaccine news will be a good time to buy those stocks, since progress towards treatment/vaccines hurts the business of these stocks.

For me, I have part of my portfolio invested in Covid sensitive stocks.  So it might make sense to add cloud stocks, which are likely to be less correlated since the pandemic started in March.  The same news that makes Covid sensitive stocks go up (like vaccine news) is likely to make cloud related stocks drop.  More lockdowns have the opposite effect.

Is "PLAN" worth adding to your list?  I saw it in a few of the above ETFs.
https://en.wikipedia.org/wiki/Anaplan

Arbitrage

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Re: Favoring tech stocks over total market
« Reply #24 on: November 01, 2020, 02:10:09 PM »
7/22/20 - sold 131.667 shares of VTI for $21,441.50 ($162.85/share)
7/22/20 - bought 74 shares of VGT for $21,158.45 ($285.93/share)
7/28/20 - bought 1 share of VGT for $280.16 ($280.16/share)

Current values:
VTI: $174.45/share * 131.667 shares = $22,969.31
VGT: $317.65/share *75 shares = $23,823.75

Updated values:
VTI: $179.22/share * 131.667 shares = $23,597.36 (2.73% gain since last update, 10.05% total)
VGT: $328.68/share * 75 shares = $24,651 (3.47% gain since last update, 14.98% total)

Assuming you continue this exercise, keep in mind that share price isn't the entire story.  VTI has a slightly higher yield.  Not a big difference, but if you wanted to be accurate it's necessary.

A quick look at the difference using Morningstar growth charts from 7/22 to 10/31 shows me that VGT has outperformed VTI over that time period by 1.5%.

hodedofome

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Re: Favoring tech stocks over total market
« Reply #25 on: November 07, 2020, 07:26:42 PM »
I donít know much about Anaplan, therefore itís not on my list. I try to stick to companies I know pretty well, stay in my circle of competence.

EricEng

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Re: Favoring tech stocks over total market
« Reply #26 on: November 08, 2020, 08:45:04 AM »
NVDA and AMD fine, switch the Palo Alto for CRWD, OKTA, ZS, NET and FSLY. Itís all about the cloud now and physical devices like firewalls matter less and less. Security is moving to cloud platforms and zero trust over locally hosted apps.
Software firewalls only suffices in certain use cases and loads.  Lot of those big "cloud services" still have physical equipment somewhere.  In the world of military/defense, cloud isn't an option and they require physical.

MustacheAndaHalf

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Re: Favoring tech stocks over total market
« Reply #27 on: November 09, 2020, 06:14:27 AM »
EricEng - Do you know about JEDI, a $10 billion cloud project by the U.S. defense department?
https://en.wikipedia.org/wiki/Joint_Enterprise_Defense_Infrastructure


hodedofome - Covid sensitive stocks and cloud computing seem like a good balance to me, so I wound up buying Wisdom Tree Cloud Computing ETF (WCLD) with it's 0.45% expense ratio.  It will be interesting to see how WCLD does today, when vaccine news is pushing Covid sensitive stocks dramatically higher before the market opens.

ColoAndy

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Re: Favoring tech stocks over total market
« Reply #28 on: November 11, 2020, 09:04:10 AM »
Several years ago, I had a lot of $ in T. Rowe Price Growth Stock.  Then went all index funds.  I kind of wish I would have left some in that T. Rowe fund.  It has been on a tear.  Though I did start buying it again this past spring.

EricEng

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Re: Favoring tech stocks over total market
« Reply #29 on: November 12, 2020, 12:54:31 PM »
EricEng - Do you know about JEDI, a $10 billion cloud project by the U.S. defense department?
https://en.wikipedia.org/wiki/Joint_Enterprise_Defense_Infrastructure
Yes, quite aware.  That's a contract to create something that doesn't exist yet within DoD at any significant scale.  Time will tell if it actually gets used.  Wouldn't be first time they spent big bucks for something that doesn't ever gain traction.

Military runs on 10-30 year old tech and it is hard to make that play nice with new systems on the cloud.  The whole infrastructure is designed to be so closed off and isolated that you have to rebuild it from ground up.

hodedofome

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Re: Favoring tech stocks over total market
« Reply #30 on: November 22, 2020, 05:54:46 PM »
NVDA and AMD fine, switch the Palo Alto for CRWD, OKTA, ZS, NET and FSLY. Itís all about the cloud now and physical devices like firewalls matter less and less. Security is moving to cloud platforms and zero trust over locally hosted apps.
Software firewalls only suffices in certain use cases and loads.  Lot of those big "cloud services" still have physical equipment somewhere.  In the world of military/defense, cloud isn't an option and they require physical.

Iím not saying on premise is dead, I just mean the growth is in the cloud and on premise matters less and less.

Sure, you can work hard and try to make money from oil and gas, but for me Iíd rather invest in electrification of everything which is the future. Same deal with the cloud.

EricEng

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Re: Favoring tech stocks over total market
« Reply #31 on: November 23, 2020, 11:47:49 AM »
NVDA and AMD fine, switch the Palo Alto for CRWD, OKTA, ZS, NET and FSLY. Itís all about the cloud now and physical devices like firewalls matter less and less. Security is moving to cloud platforms and zero trust over locally hosted apps.
Software firewalls only suffices in certain use cases and loads.  Lot of those big "cloud services" still have physical equipment somewhere.  In the world of military/defense, cloud isn't an option and they require physical.
Iím not saying on premise is dead, I just mean the growth is in the cloud and on premise matters less and less.

Sure, you can work hard and try to make money from oil and gas, but for me Iíd rather invest in electrification of everything which is the future. Same deal with the cloud.
Well Palo Alto is doing something right.  If you had bought on in early Nov when I posted about Palo Alto you would have gone from $220-240 up to almost $300.

There is so much more to it than just saying "cloud is where the growth is".  Obviously, cloud is going to grow, but other factors to consider.  Cloud by design has lower barriers to entry for competitors and easier for customers to switch.  You have very little moat around your product.  Good hardware takes a big investment which no one jumps into successfully without a large investment.  Couple college kids can make a great cloud software service, dump it onto AWS, scale as needed and boom your customers are gone.

That is also ignoring that much of Govt and DoD contracts won't certify software security solutions for many things that they want hardware separation.

Paul der Krake

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Re: Favoring tech stocks over total market
« Reply #32 on: November 24, 2020, 12:48:51 AM »
Cloud by design has lower barriers to entry for competitors and easier for customers to switch.  You have very little moat around your product.  Good hardware takes a big investment which no one jumps into successfully without a large investment.  Couple college kids can make a great cloud software service, dump it onto AWS, scale as needed and boom your customers are gone.

That is also ignoring that much of Govt and DoD contracts won't certify software security solutions for many things that they want hardware separation.
I spit out my proverbial coffee when I read the first two sentences, because to me "the cloud" has enormous moats, and enormous switching costs. It's an oligopoly dominated bya trio of trillion dollar companies, sinking in billions of dollars per year in an ever-expanding arms race.

But then reading the rest I think you're mostly thinking about products that happen to work in "the cloud". Maybe you have an example company or two to illustrate?

kenmoremmm

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Re: Favoring tech stocks over total market
« Reply #33 on: November 29, 2020, 01:25:33 AM »
this thread has certainly piqued my attention. up 'til now, i've largely been a VTSAX + REIT funds investor. but, in seeing the performance of tech over the past year, plus enough scary AI-disruption videos to make me want to question all of humanity in our future world, i would tend to agree that favoring tech seems to be a prudent strategy, or at least a hedge. my biggest fear now is that shifting funds at this point in time feels like going into THE TOP IS IN scenario, that once the current tech bubble deflates, could take some time to recover the losses.

curious if anyone has invested in or has insight into these funds by ARK:
https://ark-funds.com/arkk
https://ark-funds.com/arkq
https://ark-funds.com/arkw
https://ark-funds.com/arkg
https://ark-funds.com/arkf

all of them look appealing to me in the big picture/long term. performance since inception, excluding the post-march 2020 huge runup, looks so-so, hence my concern stated above of buying in near a top. i don't want to be a prisoner of the moment, but i look at the projections of big tech, AI, automation, and global shifts post-pandemic, and i really don't see tech underperforming.

GreenEggs

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Re: Favoring tech stocks over total market
« Reply #34 on: November 29, 2020, 08:14:14 AM »
this thread has certainly piqued my attention. up 'til now, i've largely been a VTSAX + REIT funds investor. but, in seeing the performance of tech over the past year, plus enough scary AI-disruption videos to make me want to question all of humanity in our future world, i would tend to agree that favoring tech seems to be a prudent strategy, or at least a hedge. my biggest fear now is that shifting funds at this point in time feels like going into THE TOP IS IN scenario, that once the current tech bubble deflates, could take some time to recover the losses.

curious if anyone has invested in or has insight into these funds by ARK:
https://ark-funds.com/arkk
https://ark-funds.com/arkq
https://ark-funds.com/arkw
https://ark-funds.com/arkg
https://ark-funds.com/arkf

all of them look appealing to me in the big picture/long term. performance since inception, excluding the post-march 2020 huge runup, looks so-so, hence my concern stated above of buying in near a top. i don't want to be a prisoner of the moment, but i look at the projections of big tech, AI, automation, and global shifts post-pandemic, and i really don't see tech underperforming.


I have some of each of those and also TAN.  They've all made my VGT gains look a bit depressing by comparison recently, but VGT feels "safer".   I have an approximately 50/50 split between TAN & ARKs.  And I have approximately 20% of each ARKW & ARKK and 10% each of ARKF, ARKG, & ARKQ.  (I don't know why ARKK has so much higher volume compared to ARKW.)


Here is an interesting ranking of ETFs on the 3 year timeframe.  [size=78%]https://www.finscreener.com/screener/top-gainers/stocks/etf?&o=1015[/size]




lemonlyman

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Re: Favoring tech stocks over total market
« Reply #35 on: November 29, 2020, 09:58:13 AM »
I have ARKG and accumulate frequently. Genomics seems to be an obvious growth sector in the coming decade for health and food, but I donít know enough about any of the companies to invest any. I like the fund for now.
« Last Edit: November 29, 2020, 10:00:23 AM by lemonlyman »

EricEng

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Re: Favoring tech stocks over total market
« Reply #36 on: November 30, 2020, 04:30:34 PM »
Cloud by design has lower barriers to entry for competitors and easier for customers to switch.  You have very little moat around your product.  Good hardware takes a big investment which no one jumps into successfully without a large investment.  Couple college kids can make a great cloud software service, dump it onto AWS, scale as needed and boom your customers are gone.

That is also ignoring that much of Govt and DoD contracts won't certify software security solutions for many things that they want hardware separation.
I spit out my proverbial coffee when I read the first two sentences, because to me "the cloud" has enormous moats, and enormous switching costs. It's an oligopoly dominated bya trio of trillion dollar companies, sinking in billions of dollars per year in an ever-expanding arms race.

But then reading the rest I think you're mostly thinking about products that happen to work in "the cloud". Maybe you have an example company or two to illustrate?
Sorry, I was referring to the end user Cloud Services people sign up for, basically websites and online software.  Software as a service B.  Not the companies providing the server and network backbone (IE AWS).  Providing the physical infrastructure itself does have a very large moat and investment at their scale.  However, I would compare Amazon's infrastructure to a power plant, both are huge capital investments to provide the power to a business to a product or service.  If all you want to provide is a basic website "Software as a Service" you don't need relatively much hardware depending on the software.

The cloud computing stock funds that someone listed were for Software as a Service and Platform as a Service companies, which have very small moats and could be replaced by clever upstart programmers scaling on AWS.  Heck, that's how the Healthcare Marketplace rebooted after the initial terrible rollout in 2013.  Bunch of smart recent college grads rebuilt from ground up and used AWS (newish at the time) to scale up quick.

« Last Edit: November 30, 2020, 04:32:20 PM by EricEng »

Le North Dreamer

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Re: Favoring tech stocks over total market
« Reply #37 on: December 02, 2020, 09:27:09 AM »
Interesting Topic.

I was tempted to buy some tech-focused ETFs over the course of this year but ended up focusing on my general portfolio and some Canadian Banks back in March, buying stocks and ETFs for cheap.

I'm now sitting on a bit of cash accumulated over the last few months and these S&P500 and NASDAQ records are keeping me from buying into tech at the moment. I'm fully aware that I'm trying to time the market by doing so, but I feel like I should wait for a dip before buying in.

Will definitely be following some of the ETFs mentioned here.

Cheers

hodedofome

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Re: Favoring tech stocks over total market
« Reply #38 on: December 05, 2020, 07:29:58 AM »
Cloud by design has lower barriers to entry for competitors and easier for customers to switch.  You have very little moat around your product.  Good hardware takes a big investment which no one jumps into successfully without a large investment.  Couple college kids can make a great cloud software service, dump it onto AWS, scale as needed and boom your customers are gone.

That is also ignoring that much of Govt and DoD contracts won't certify software security solutions for many things that they want hardware separation.
I spit out my proverbial coffee when I read the first two sentences, because to me "the cloud" has enormous moats, and enormous switching costs. It's an oligopoly dominated bya trio of trillion dollar companies, sinking in billions of dollars per year in an ever-expanding arms race.

But then reading the rest I think you're mostly thinking about products that happen to work in "the cloud". Maybe you have an example company or two to illustrate?
Sorry, I was referring to the end user Cloud Services people sign up for, basically websites and online software.  Software as a service B.  Not the companies providing the server and network backbone (IE AWS).  Providing the physical infrastructure itself does have a very large moat and investment at their scale.  However, I would compare Amazon's infrastructure to a power plant, both are huge capital investments to provide the power to a business to a product or service.  If all you want to provide is a basic website "Software as a Service" you don't need relatively much hardware depending on the software.

The cloud computing stock funds that someone listed were for Software as a Service and Platform as a Service companies, which have very small moats and could be replaced by clever upstart programmers scaling on AWS.  Heck, that's how the Healthcare Marketplace rebooted after the initial terrible rollout in 2013.  Bunch of smart recent college grads rebuilt from ground up and used AWS (newish at the time) to scale up quick.

IMO those who say the SAAS products are easily replaced and have small moats show a lack of understanding of the marketplace. Iím the one who listed all those stocks above, and I have good reasons for listing those. B2B apps donít get ripped out and replaced very often. A company switches to a modern CRM and they stay on it for years, usually at least 10-20 years. They switch phone systems and stay on it for 20 years. They switch accounting software and stay on it for 20-30 years. Whoever is the most popular app for that industry/task/department at the time, is going to own the market for 20-30 years. All the popular apps over the past 30 years were developed in the 70s and 80s. Now the new apps being developed since 2000 are taking over and will own the B2B market for 20-30 years.

They become popular today by 1) being cloud native 2) easy to implement 3) easy to use 4) have the features necessary to do the tasks 5) have as many integrations to other apps as possible 6) being one of the first is usually necessary as they have a head start on the competition.

Once you become the industry standard (like ServiceNow, Bill.com, RingCentral, DocuSign, Salesforce, etc) you stay that way for a while, no matter how many competitors try to pop up. A business isnít going to flip flop around to different apps all the time, if the app is modern and does the job there is no reason to go through the effort to change. Thereís got to be a real ROI to justify the change.

EricEng

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Re: Favoring tech stocks over total market
« Reply #39 on: December 05, 2020, 10:24:55 PM »
IMO those who say the SAAS products are easily replaced and have small moats show a lack of understanding of the marketplace. Iím the one who listed all those stocks above, and I have good reasons for listing those. B2B apps donít get ripped out and replaced very often. A company switches to a modern CRM and they stay on it for years, usually at least 10-20 years. They switch phone systems and stay on it for 20 years. They switch accounting software and stay on it for 20-30 years. Whoever is the most popular app for that industry/task/department at the time, is going to own the market for 20-30 years. All the popular apps over the past 30 years were developed in the 70s and 80s. Now the new apps being developed since 2000 are taking over and will own the B2B market for 20-30 years.

They become popular today by 1) being cloud native 2) easy to implement 3) easy to use 4) have the features necessary to do the tasks 5) have as many integrations to other apps as possible 6) being one of the first is usually necessary as they have a head start on the competition.

Once you become the industry standard (like ServiceNow, Bill.com, RingCentral, DocuSign, Salesforce, etc) you stay that way for a while, no matter how many competitors try to pop up. A business isnít going to flip flop around to different apps all the time, if the app is modern and does the job there is no reason to go through the effort to change. Thereís got to be a real ROI to justify the change.
]
Oh I understand the marketplace.  My Megacorp utilizes dozens of Saas products for our software development environment and research labs.  And we also change pretty often whenever they try to jack the pricing up (quite a few pulled that this year with Covid).  They assumed we wouldn't eat the cost and time for a 60-200% annual price increase.  Yes, there is a cost to change, but these modern services are becoming a lot more plug and play or easy to standup a test environment and switch over night once everything is in place.  Old software you are referring to was extremely specific and hard to swap out, if at all.  Good luck pointing to a Saas product that doesn't have 2-3 equivalent competitors happy to undercut.

A moat is not determined solely by the cost incurred of changing products.  It also depends on unique features, support, reliability, and price.  Taking those other factors into account, most Saas products have narrow, shallow moats.