Sunday, August 24, 2008

Gadget Stocks

it's not cars or construction or banking or basic commodities that will determine the next phase of the US Stock Market. it's electronic gadgets. or so I've just deduced.

the Nasdaq 100 Index has so far held up much better technically than the other popularly quoted stock market proxies. here is the chart:

the bottom graph shows the performance of the NDX relative to the broad market measuring Wilshire 5000 Index. you can see how the NDX has been out-performing the market as a whole.

but then this evening I looked at the performance of the NDX, which is a capitalisation weighted index, compared to the less publicised Nasdaq 100 Equal Weighted Index (NDXE). I notice that the NDX has been persistently out-performing the NDXE for quite a while:

so it occurred to me that the largest stocks in the NDX must be performing disproportionately well. what are the biggest stocks in the index? according to the companies with the largest weightings in the QQQQ tracking stock are:

Apple Inc. 12.47%
Microsoft Corp. 6.29%
QUALCOMM Inc. 5.09%
Google Inc. 4.91%
Research In Motion Ltd. 4.23%

(I've yet to figure out why Apple comprises twice as much of the index as Microsoft, so if someone could clue me in on that I'd be grateful...)

anyway, of the top five stocks here, MSFT and GOOG have done OK of late, in that they haven't completely collapsed. but it's the other three that have contributed so much to the strength of the NDX. and all three of them make annoying little gadgets.

I may be the only person in the Western World who has never owned an MP3 player or a PDA or a cell phone. yeah, I'm sure they're great -- if you're addicted to superfluous communication and shitty music. hey, maybe I'm the marginal consumer, maybe after I break down and buy one of these contraptions that'll mark the apex of the growth curve. something like that. but no, I doubt I'll buy. guess instead I'll have to watch charts.