So far in April, half of the gains generated by the Nasdaq 100 were produced by the stocks from just four companies, Apple, Amazon, Microsoft and Facebook. The equal weight version of the index has been in decline. That implies relative weakness in the overall index, masked by strength in a few very large companies. Vildana Hajric and Sarah Ponczek report for Bloomberg:
The Nasdaq 100 is on a tear, hitting record after record. But the upward push is being driven by just a handful of familiar names, with four adding half its gains this month.
Apple Inc., Amazon.com Inc., Microsoft Corp. and Facebook Inc. have collectively contributed about 50 percent of the Nasdaq’s gains in April. The equal-weight version of the index, meanwhile, has been on a downtrend, closing lower four out of the past five sessions. It’s up less than 4 percent this month, compared with the Nasdaq’s 5 percent advance.
“You want to see broad-based participation in these movements,” said Tim Courtney, chief investment officer at Exencial Wealth Advisors, which has about $2.4 billion in assets. “When you see that just a handful of stocks are driving it, that’s not as healthy as an investor would ideally like to see. You should get a queasy feeling when you see that.”
The tech-heavy Nasdaq closed at a record 7,713.49 on Monday, up 22 percent so far this year. It’s up in early trading Tuesday and is on pace to close at an all-time high for the fourth consecutive session. The Nasdaq 100 has beaten its equal-weight counterpart seven of the past nine weeks, and last week marked the largest outperformance since November. The Nasdaq has never before hit three consecutive highs while the equal-weight index fell during all of those sessions, according to Twitter chart watcher @OddStats.
Since the equal-weight version of the index gives all stocks equal footing, smaller companies like Xilinx Inc. or Cerner Corp. hold the same significance as, say, Amazon. Qualcomm Inc., Hasbro Inc. and Wynn Resorts Ltd. are its largest outperformers, accounting for a quarter of its gains this month. The Nasdaq’s big performers can’t be found in the equal-weight’s top 10 list, which is filled with names like Maxim Integrated Products Inc. and NetEase Inc.
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Jeremy Jones, CFA
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