eToro’s weekly Nasdaq focus: Q4 data shows Aussie investors kept the faith in big US tech stocks (and the metaverse)
The latest eToro trading data is in for the December quarter. And as one of the domestic trading platforms that provides access to global stocks, it provides some insights into how local investors are thinking about international shares.
Heading into the end of the December quarter, inflation and rising bond yields were casting doubts on the outlook for big US tech stocks that have dominated the post-COVID bull market.
But the data from eToro suggests that for now, local investors aren’t fazed.
Of the top 10 international shares held by Australian investors as at December 31, eight were pure-play tech names and the other two were tech-adjacent (EV manufacturers).
Here’s what the latest eToro data looks like:
Metaverse (unless you’ve been living under a digital rock).
It’s still early days, and the outlook for a more dedicated human leap into various virtual realities is still a subject of fairly hot debate.
Late last year, pro investor Luke Winchester told Stockhead it’s too early to know for sure how the metaverse will develop — from commercial applications (such as geospatial mapping) to personal use.
But one thing he has confirmed is that “there really is money being spent here”.
“There’s capital moving into it, although where it ends up I don’t know.”
For Aussie investors in eToro in the December quarter, their capital ended up in Meta — the rebranded social media and technology giant previously known as Facebook.
After falling out of the top 10 most-owned stocks in the September quarter, Meta rose back up to sixth place following its name-change.
Commenting on the shift, eToro strategist Ben Laidler noted that it took place despite a period of underperformance, as Meta lagged its tech-behemoth peers in Q4.
However, there may have been another factor behind that demand — the stock is starting to look comparatively cheap.
“At 23 times 2022 consensus earnings, it is the cheapest of all the major US tech stocks, with a valuation nearly in-line with the overall S&P500″ on a price-to-earnings basis, Laidler said.
That said, he added that a dose of metaverse excitement among Aussie investors probably also played a role.
“The metaverse is a huge growth opportunity and the fact Meta has thrown its brand and resources behind it will be a big catalyst for its development,” Laidler said.
“And while it is not the only company exploring this area, it will no doubt be one of the major players.”
“Don’t fight the Fed” is an old adage in investment circles.
In other words, invest accordingly based on what the US Federal Reserve is doing.
Right now, the Fed has clearly communicated it plans to tighten monetary policy, with interest rate rises and a controlled reduction in its balance sheet.
The conventional wisdom says that higher rates are broadly negative for the Nasdaq and growth-focused tech stocks. However, Aussie investors on eToro aren’t buying it (at least not yet).
Elon Musk’s EV juggernaut Tesla maintained its number-one spot as the most-held stock.
So far this year Tesla shares are still holding comfortably above US$1,000, down slightly from all-time highs above US$1,200 in November.
Aussie investors are also big fans of Chinese EV Nio (No 3 most-owned), which is headquartered in Shanghai and listed in New York.
Oh, and remember GameStop? It’s back in vogue — the fourth most-owned stock by Aussie eToro investors in the December quarter.
After ramping from ~US$4 to over US$300 last year, GME shares climbed back above US$200 in Q4 before closing the year at ~$148.
Shares in the company got a little bounce at the start of this year after it flagged plans to enter the NFT market.
For eToro analyst Josh Gilbert, the Q4 trading data indicates that Australian investors are confident in taking a long-term view, and looking through any short-term noise associated with inflation and interest rates.
EV manufacturers such as Tesla and Nio “are companies they believe will thrive over the next decade”, he said.
“Investors aren’t getting caught up in short term price movements, but instead looking ahead and focusing on future growth.”
The second key point to note is that when it comes to global investments, the big US tech stalwarts hold sway for local investors.
“With Apple featuring second on the list, it also demonstrates to us that Australian investors are confident in the growth of Big Tech moving forward,” Gilbert said.
“Australian eToro investors are choosing to invest in stocks that they know, love and use in their everyday lives. Apple, Amazon, Meta and Alphabet are clear examples of this.”