Tech Stocks Still Rule: Here's Why

Welcome to Episode #82 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Tracey is joined by Kevin Cook, Editor of the Healthcare Innovators and TAZR portfolios, to talk about what the big fund managers bought in the first quarter of 2017.

You may recall, that fund managers are required to submit Form 13-F, which depicts their stock trades, within 45 days of the end of the quarter. That deadline just recently passed so we’re now getting a look at what some of the top managers are buying.

They’re Buying Snapchat?

Tracey and Kevin were surprised to find out that numerous big managers, including even George Soros, bought Snapchat (SNAP) after its recent IPO.

These buys came before the recent earnings report, which was a disappointment to many investors.

Some of the same buyers of Snapchat, also own Facebook (NASDAQ:FB), which obviously owns Snap competitor Instagram.

Why would they need to own both?

Should you be buying Snapchat or Facebook if you want to get into social media and digital marketing?

The Semis Still Reign

The semiconductor group was red hot in 2016 and they remain so in 2017.

David Tepper at Appaloosa added to his Micron (MU) position while Bridgewater Associates Ray Dalio started a new position in it.

No stock was hotter in 2016 than NVIDIA (NVDA). It cooled off to start 2017. Did the fund managers see a buying opportunity?

You might be surprised to find out what the managers were doing with Nvidia.

China Back in Play

It looks like the Chinese economy may be awakening after a few years in the doldrums.

Was anyone piling into Alibaba (NYSE:BABA) in the first quarter?

It reports earnings this week. It has beat 3 quarters in a row and shares are near new highs. It looks like Alibaba is turning it around as far as the Street’s expectations.

John Blank, Zacks Chief Equity Strategist, and a PhD economist, as well as the editor of Zacks Large Cap Trader, for a discussion about the US economy and a return to 4% growth.

Both Tracey and John remember the go-go 90s, which was the last time the US economy grew over 4% a year. From 1997 to 2000, it hit the magic number, and then some every year. Those were the days.

But the economy also paid a high price for that, with the dot-com bust and recession of the early 2000s.

The US economy hasn’t returned to 4% in the 17 years since.

Could we do it again in 2017 or 2018?

Three Factors That Drive GDP

John lays out the three major factors that drive GDP.

1. Labor force growth

2. Capital deepening

3. Multi-factor productivity

What are the odds of achieving each, or all, of these factors over the next year or two? John explains each factor.

Demographics also comes into play. As Mary Daly, executive vice president and director of Research, in the Federal Reserve Bank of San Francisco’s April 2017 Fed Views article writes, the Baby Boomers, one of America’s largest generations, are now retiring.

They will be saving more and spending less, which will have a big impact on consumption.

Does John think the US economy can get to 4% even without the Baby Boomers? And what about the slowdown in immigration?

Can Tax Reform and Infrastructure Spending Get the US Back to 4%?

Everyone is pinning their hopes on tax reform and infrastructure spending.

Both of these plans make up one of the three factors of GDP John outlines.

It’s possible, if both happen, that the US economy could get a temporary boost to 3% or 4% growth, although John is more dubious on this happening than Tracey.

But if there is a temporary one to two year GDP boost, where should you invest?

Where to Invest for 4% Growth

1. Consumer discretionary will be huge, as it was in the late 1990s, as salaries rise and cash flows into the economy. You’ll want to buy stock in companies like Tesla (NASDAQ:TSLA) and other luxury goods makers.

2. Luxury homes should also do well so look to companies like Toll Brothers (TOL).

3. If companies funnel the corporate tax cuts back into capital spending, the heavy machinery companies like Cummins (NYSE:CMI) and Caterpillar (NYSE:CAT) will benefit.

4. Further infrastructure spending will boost the big construction firms like Tutor Perini (TPC).

What else do you need to know about the magical 4% GDP dream and investing to cash in?

Tune into this week’s podcast to find out.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple (NASDAQ:AAPL) sold a mere
1 billion iPhones in 10 years but a new breakthrough is expected to generate more
than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging
phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>