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5 Big-Cap Stories: Zacks SEPT Market Strategy

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The following is an excerpt from Zacks Chief Strategist John Blank’s full Sep Market Strategy report To access the full PDF, click here



No trader will argue much about this.

Five big tech names -- MSFT, AAPL, AMZN, META, GOOGL -- have played a major role in U.S. stock market cap weighted large cap indices -- for the last two decades.

We give them group names like FAANG or MAGA. In fact, their underlying annual EPS growth, the quarterly record of EPS surprises, and share price stories are quite different.

(NOTE: For a clearer view. click on the full PDF.)


Zacks Investment Research
Image Source: Zacks Investment Research


For a first example of this: MSFT and AAPL share prices have moved together. Yet MSFT got a big broker ratings lift beginning in 2018. A noted takeoff for covering broker ratings on AAPL picked up in the early 2020 COVID period.

For a second example: In 2022, AMZN and META suffered big covering analyst ratings downgrades, in terms of what Zacks collected on their related broker recommendations.

Third: GOOGL showed some volatility in broker recommendations. Consult this below.

(NOTE: For a clearer view. click on the full PDF.)

Zacks Investment Research
Image Source: Zacks Investment Research


A final Zacks Advisory Tools chart below shows the six major tech tickers inside two new groups: (MSFT, AAPL, GOOGL on the left side) and (AMZN, META and NVDA on the right side). The blue line is their annual EPS growth rate. The red line is the EPS growth rate for their respective Zacks industry group.

(NOTE: For a clearer view. click on the full PDF.)


Zacks Investment Research
Image Source: Zacks Investment Research

Zacks Investment Research
Image Source: Zacks Investment Research


In summary, perhaps the right-hand side tickers of (MSFT, AAPL, and GOOGL) should be thought of as both pre-COVID and post-COVID winners.

The post-COVID era has been less kind to the left-hand side earnings fundamentals of AMZN, META, and NVIDIA. That final big chip stock is suffering mightily from the loss of Bitcoin mining activity.

My key closing points?

The biggest tech stocks are best viewed as individual businesses and stock tickers.

Share acronyms are hiding their evolving differences -- at a more fundamental earnings and revenue growth level.

Zacks September Sector/Industry/Company Telescope

Entering September, the Zacks Industry Ranks offer one Very Attractive sector: Energy again. But this sector may see declining future strength from $87 WTI oil a barrel. However, higher U.S. Henry Hub natural gas prices assist.

Financials and Industrials got noted upgrades to Attractive. In Financials, Insurance looks great. However, recession worries hover over this sector. In Industrials, look into Pollution Control.

Info Tech rose to Market Weight from a Very Unattractive sector. Misc. Tech is excellent. Computer-Software Services are OK. Semis look terrible.

Utilities stay as a Market Weight. Electric Power & Natural Gas Distribution are the best. Health Care and Communication Services stay on at Market Weight too. Medical Care remains solid.

Both Consumer Staples and Consumer Discretionary stay at Market Weight. Autos-Tires-Trucks are excellent again. Beverages in Staples are the best in that space.

Materials stayed Very Unattractive industry. The Chemicals & Steel look a touch under OK.

(1) Energy stays the top sector, remaining firmly at Very Attractive. Tops are Oil Misc. industries, the big Integrated plays, and the Oil Drillers.

Zacks #1 Rank (STRONG BUY): Cheniere Energy (LNG - Free Report)

(2) Financials moved up to Attractive from Unattractive. Insurance is clearly the best now. Real Estate, Banks-Major and Finance are OK. 2023 recession worry remains relevant to this space.

Zacks #1 Rank (STRONG BUY): Interactive Brokers (IBKR - Free Report)

(3) Industrials
rise to Attractive from Unattractive. Pollution Control is the top group. Transport remains strong. Business Services, Metal Fabricating, and Air-Transport are Market Weights.

Zacks #1 Rank (STRONG BUY):  BAE Systems (BAESY - Free Report)

(4) Utilities stay a Market Weight. Utilities-Electric Power and Gas Distribution are solid plays.

(5) Health Care stays a Market Weight. Medical Care carries on as best.

(6) Communications Services stays at Market Weight. Telco Equipment looks the best here.

(7) Consumer Discretionary stays at Market Weight. Autos/Tires/Trucks looked the best. Non-food Retail/Wholesale Other Cons. Disc. and Media was OK. Leisure Services fell to below market weight. Home-Furnishing, Apparel, and Publishing remained very poor.

(8) Consumer Staples stay at Market Weight. Beverages look the best now. Agri-business fell back 2 notches to Market. A Very Poor stance for Tobacco and Soaps & Cosmetics.

(9) Info Tech rose to Market Weight from Very Unattractive. Misc. Tech is outstanding now. Computer-Software Services is near a Market Weight. Semis look terrible, though.

(10) Materials remain Very Unattractive. Chemicals and Steel are the best industries.


Away from the global Energy crunch, I think this is fair.

Any late 2022 U.S. market cap weighted stock index narrative, bearish or bullish, distills down to a mega-cap leadership tale.

S&P500 index returns are tied to 5 big tech names: MSFT, AAPL, AMZN, META, GOOGL

Add NVDA if you want to include chips.

That’s it for me.

Enjoy the rest of my SEPT 2022 Zacks Market Strategy report.

Warm Regards,

John Blank
Zacks Chief Equity Strategist and Economist

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