- US tech giants will ultimately gain from the coronavirus outbreak, billionaire investor Bill Ackman told The New York Times in a recent interview.
- “The impact of the crisis on companies like Amazon is actually a little bit of short-term negative because they’re spending a lot of money managing through this, but it’s long-term hugely beneficial to the company,” the Pershing Square boss said.
- Apple, Amazon, Facebook, Microsoft, and Google-parent Alphabet make up a big chunk of the stock market, and their bright outlook may explain stocks’ recent gains, Ackman argued.
- To the extent the market’s strength reflects their prospects, that “doesn’t seem wrong to me,” he added.
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Stocks may be outperforming because US technology titans are poised to become even more dominant thanks to the coronavirus pandemic, billionaire investor Bill Ackman told The New York Times earlier this month.
‘The impact of the crisis on companies like Amazon is actually a little bit of short-term negative because they’re spending a lot of money managing through this, but it’s long-term hugely beneficial to the company,” the Pershing Square chief told the newspaper.
Assuming that’s why investors are bidding up stocks, the market’s recent strength ”doesn’t seem wrong to me,” added the hedge-fund manager, who famously turned $US27 million into $US2.6 billion by hedging the market meltdown.
Thriving in a digital world
Apple, Amazon, Facebook, Microsoft, and Google-parent Alphabet account for more than 20% of the S&P 500’s weighting. Along with other tech companies such as Netflix and Slack, they are well-placed to prosper as people spend more time at home.
For example, consumers are buying more things online and businesses are relying on video streaming, mobile apps, cloud hosting, and other virtual tools to function.
Moreover, the tech industry is in a much stronger position than other sectors. For instance, airlines, cruise lines, restaurants, theme parks, cinemas, casinos, and physical retailers have been hammered by stay-at-home orders, business closures, and travel restrictions.
As a result, tech companies could pull ahead of competitors who are less financially secure or less suited to weather the current crisis.
Betting on tech
Ackman’s argument is that the relative weight of “big tech” in stock indexes, coupled with their resilience to the current downturn, may explain why the stock market has surged despite plunging economic growth and soaring unemployment.
Several billionaire investors snapped up tech stocks in the first quarter, validating Ackman’s viewpoint.
For example, Seth Klarman’s Baupost invested in Google and Facebook, Dan Loeb’s Third Point tripled its Amazon holdings, Howard Marks’ Oaktree Capital more than doubled its Alibaba stake, David Tepper’s fund bought Netflix and Twitter shares, and George Soros’ fund boosted its Peloton stake.
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