July 22, 2019 | The Secret of Wall Street’s Genius Stock-Pickers

The geniuses who get paid to throw other people’s money at a small handful of stocks appear to have narrowed their task down to an irreducible minimum in 2019. Just four tech biggies — Microsoft, Apple, Amazon and Facebook — have accounted for fully 20% of the S&P 500’s total return so far this year, according to the Wall Street Journal.  Portfolio managers at Vanguard, T. Rowe Price, State Street et al. evidently think and act as one to make certain the game always moves in their favor. By sticking together and even doubling down on companies they might otherwise shun, it’s possible to pump stocks full of hot air even when prospects for those companies take a negative turn.

For instance, weakening iPhone sales in the U.S. and China have revealed how far Apple has declined as an innovator. Clueless about the next big thing, the Cupertino firm earlier this year drum-rolled a planned leap into a streaming content business so saturated with high-quality “product” that even Netflix, the 800-pound gorilla, seems to be losing steam. As for Facebook, Putin probably enjoys more trust worldwide than Zuckerberg. The latter has so many enemies on Capitol Hill that his proposed cryptocurrency, Libra, may not even get off the ground.

Bet on Microsoft

The shares of both companies have climbed vertically since early June, so it’s safe to say that their respective problems are not even a remote concern to Wall Street’s vaunted stock-pickers. Boeing’s problems, on the other hand, amount to a full-blown scandal — one that is liable to produce tort claims well in excess of the $5 billion the company ostentatiously set aside recently following two 737 Max crashes that killed 346 passengers. Even so, the aircraft manufacturer’s shares are within 20% of all-time highs, defying gravity simply because their institutional sponsors evidently determined to stand their ground as one no matter how bad the news.

The genuine winner in the group is Microsoft, which, ironically, couldn’t innovate its way out of a wet paper bag. Instead, the company went all-in with a cloud-subscription model that has made it unnecessary for them to shove a new version of Windows/Office down our throats every five years. The real surprise  is that the customer support that Microsoft disdained to provide for three decades is now excellent.  If the stock-pickers winnow down their “buy” list to just one stock in 2020, bet on Microsoft.

Rick Ackerman July 22nd, 2019

Posted In: Rick's Picks

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