In the past couple of weeks, tech stocks have not been performing that well. Generally, they used to demonstrate a better performance than blue chip investments but maybe the sides have reversed, and it is the latter that have an edge in the market now.
Considering the analysis of the past week, LinkedIn stocks have fallen by 13% and Yelp stocks also fell by 14%. This same situation was experienced for other technological companies, and so many of them saw their stocks dropping. According to the industry experts, this is a classic example of sector rotation.
We talked to the industry experts about this, and they told us that seasoned investors do not move with the market. Whereas some sectors fall down during the rallies, others rise high during the selloffs. For the beginner companies, this is a little hard to tackle. LinkedIn has only been in the industry for three years, and still has to climb higher on the ladder.
As of right now, companies which have been around for several years in the market, are also feeling the pressure of sector rotation. In 2014, Amazon’s stocks have gone down by 19%. For technological companies, the greatest drop has been recorded at 26%, which is for Netflix, a major video streaming company.
Both Amazon and Netflix have been involved in public trading since the beginning of the internet, and are already aware of how investors play their game in the market.In the past five years, tech stocks have enjoyed stellar gains. The experts are not surprised that investors are selling more of these. But these investors have a challenge to face. How will they determine when they should buy these stocks again?
An experienced investor told us that a stock is regarded to be in the bear market if its value drops by 20%. If this is used as a classification, Amazon, Facebook and Netflix are all in the bear’s market. He added that these stocks will entice investors once more, and they will buy them back again. After all, the fact cannot be ignored that all these three companies are at the top in their respective industries and are just growing bigger every day.
The experts claim that tech stocks will bounce back eventually, but none of them are too sure about the timeframe. What is sure is that this will only be when sector rotation ceases.