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Technology Rotation Continues – Silver Linings Emerge
There is no doubt that investors are getting excited about a corporate tax cut that is on the horizon. You can see it just by looking at the sector performance; it is clear as a beautiful day in Montauk on the eastern end of Long Island, overlooking the Block Island Sound.
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Where is money flowing for the moment? From Technology into Industrials and Financials. Here are the effective tax rates of the “FANG’s” Facebook ($FB), Apple ($AAPL), Netflix ($NFLX) and Alphabet ($GOOGL). Notice how I omitted Amazon ($AMZN), more on that in a minute.
GOOGL Effective Tax Rate (TTM) data by YCharts
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It looks like Apple’s effective tax rate is the highest there at about 24 percent, how much do you think Apple benefit from a tax cut? Not much.
From the chart Amazon below we can see the tax rate they pay is pretty much all over the place, along with the operating and net income.
AMZN Effective Tax Rate (TTM) data by YCharts
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Then there are the Industrials, like Boeing ($BA), 3M ($MMM), Union Pacific ($UNP), General Dynamics ($GD), FedEx ($FDX) which pay very high levels of Tax.
BA Effective Tax Rate (TTM) data by YCharts
The banks also pay high effective tax rates as well.
JPM Effective Tax Rate (TTM) data by YCharts
So money is merely rotating right now, eventually, when valuations get sorted out over the next couple of days and weeks, things should start evening out again.
If there is one piece of good news that came out of yesterday is that support levels have been tested and have held for now. We can see that the uptrend in the technology ETF ($XLK) held its uptrend.
While stocks like Mastercard, which got slammed, are still within its trading channel.
Amazon stayed above its support level too.
While Micron found support at a gap which has now been filled circled below.
The rotation is still on, for now…
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Michael Kramer and the Clients of Mott Capital own shares of NFLX, MA, GOOGL
Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future.
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Tags: #banks #technology #industrials #tax #reform #fedex #ups #citigroup #amazon #micron #mastercard