Last weekend, in our Weekly Earnings Update, we mentioned the increase in the SP 500’s earnings growth for the last week, and how actual SP 500 year-over-year earnings growth had jumped from +1.7% to +3.3%.
What surprised us was the big jump in Technology earnings growth, particularly given the performance of the large-cap tech names and the QQQ year-to-date.
Technology as a sector, saw y/y earnings growth jump from +2.7%, the week of April 18th to +7.8%the week of April 25th.
Facebook (FB) had a good quarter as did Microsoft, but I wanted more color on the increase, so I reached out to Gregg Harrison of Thomson Reuters, who prepares and writes the weekly, “This Week in Earnings” commentary.
Gregg was kind of enough to send me this spreadsheet on the week-to-week changes in Technology’s sub-sectors: SP500Techwkof42514.
Obviously, Apple (AAPL), Facebook (FB) and Microsoft (MSFT) all reported good results. In terms of market cap, that is a nice percentage of Technology sector.
The decline in Facebook (FB) since the report represents opportunity in our opinion. That was a monster quarter by the social media giant.
11 of the 13 sectors listed in the spreadsheet saw weekly growth or improvement in terms of the y/y growth.
If the SP 500 does see the “sell in May” mantra that so many talk about, Large-cap Technology should be a safe haven, which is very contrary to popular opinion.
The 200-day moving average for the QQQ’s is $83 and change. That would be the easiest way to play the sector in our opinion.
More importantly, Technology’s full-year 2014 expected earnings growth increased last week to +9.2% from April 1’s +8.9% and last week’s +8.5%.
Our own opinion – stay with large-cap tech, even through the “Sell in May” weakness should it materialize.
Trinity Asset Management, Inc. by:
Brian Gilmartin, CFA
Portfolio manager