SMO Exclusive: Strength Report Technology Sector 2024-02-22

Brian Degracia

23 Feb 2024 • 4 min read

2/22/24 Tech Thursday – forget NVDA, bet you didn’t know Computer Software/Services struggled this week with 81% negative stocks and 12% of its 195 stocks falling more than 10%. Is this problematic? Who knows? But now you know. Conversely, Electronics has 14% of its stocks at 5+ year highs.

About NVDA: $2 trillion market cap / $61 billion FY24 revenue = 33x Revenues.

Not an exact comparison, but… Scott McNeely, Sun Microsystems 2002: “…two years ago we were selling at 10 times revenues when we were at $64. At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes.”

Takeaways:
🔹 Strongest Industries: Computer Software/Serv (81% stocks negative this week), Electronics, Internet (Strong, 4th strongest of 9 levels)
🔹 Weakest Industries: Computer Hardware, Telecommunications (70% negative) (Average, 5th strongest)
🔹 Sub-industries (28): 4% Strengthened, 25% Weakened
🔹 Stocks rated Strongest:Weakest: Computer Software 43%:12% of total, Electronics 42%:20%, Internet 45%:15%
🔹 Outliers: 12% Software, 11% Electronics, 12% Telecommunications stocks fell more than 10%
🔹 5-Year Highs/Lows %: Electronics 14%, Internet 10% at highs, Telecommunications 10% at lows

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This report may particularly be of interest if the following 5 concepts resonate with you:

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The journey to a multi-month rally begins with one up week.
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