The annual Consumer Electronics Show in Las Vegas ended last week and my Twitter stream is the better for it. My favorite quote about this show was from Jeff Richards, Managing Partner of GGV Capital, who told CNBC “I don’t think you missed much if you weren’t there.”
Has this event jumped the shark? I envision it’s probably something like the Vegas Trader’s Expo right after the market crash in 2008. Empty booths. Vendors with vacant, hollow eyes. Attendees wandering aimlessly looking for the next big thing—and never finding it.
But here’s the question on everyone’s mind: what technologies are consumers really into?
Yes, they love technology
For the past five years, retail investors at TD Ameritrade have invested more in Information Technology than in any other sector. During that time frame, they increased their allocation in IT by over 2%. Currently, they hold over 19% of their investments in IT. While IT through mid-January was down slightly year-to-date and was underperforming the Standard & Poor’s 500 Index, over the past five years, this sector returned over 72%.
Main Street investors represent the demand for many of the products in this sector. They are crazy about gadgets and technology. And a lot of consumers don’t just buy the products of companies they love, they often buy the stocks as well. Last week they were net buyers in this sector, including Google (GOOG) and MasterCard (MA). I watched over $300 million roll into IT.
So which tech stocks do Main Street investors really love? The five most widely held IT stocks in TD Ameritrade client portfolios are as follows:
- Apple - On any given day, retail investors are about 40% of Apple volume. They love this company, they own their products, and from what we see, about 75% of our clients’ trades come through an Apple device. Just last week, our clients were big buyers of Apple (AAPL) as it dipped to $104. Retail is looking forward to January 27 when Apple reports earnings. Analysts will likely focus on revenues from the newly launched Apple Pay and device sales—particularly for the iPhone 6, iPad Air 2, and iPad mini 3.
- Microsoft - In an October letter to shareholders, CEO Satya Nadella said Microsoft will be "the productivity and platform company for this mobile-first and cloud-first world. We will empower every person and every organization on the planet to do more and achieve more.” In addition to cloud and mobile goals, Microsoft (MSFT) also made strategic moves to appeal to a younger demographic. Gaming is still a priority. Witness their recent purchase of popular Minecraft. Blocky gaming and magical worlds aside, Minecraft draws a younger crowd and a devoted audience to add onto their Xbox One gaming consoles. It’s also likely our clients dig the company’s yield and may view it as a longer-term position.
- Intel - Making it clear they aim to be the boss of the IT playground, Intel (INTC) wants to be THE company that powers an interconnected tech lifestyle—from chips to enterprise. Clients will likely watch their earnings for progress on their strategic growth initiatives on wearables and mobile that appeal to a range of price points. And, like Microsoft, retail clients may prize Intel’s long-term dividend growth.
- Facebook - The stock continues to be widely held with investors ever since Facebook (FB) demonstrated its ability to monetize via mobile advertising. Video is growing on social networking sites. Case in point, Facebook’s recent QuickFire acquisition grows their video capabilities and could position them as a YouTube competitor.
Alibaba - Making a big splash this summer as the largest IPO, in just a few months Chinese e-commerce giant Alibaba (BABA) is now in the top five of our clients’ portfolios. Retail tends to invest domestically, so this is quite noteworthy. But Alibaba is the largest online and mobile commerce company in the world. Retail investors seem to think they have a lot of runway because China’s online shopping penetration is still relatively low, at less than 50%.
Will the Love Affair Continue?
With earnings season officially kicking off this week, Main Street investors will likely pay particular attention to these five stocks. Here’s a quick list of upcoming reports:
- INTC on January 15 (today)
- MSFT, January 26
- AAPL, January 27
- FB, January 28
- BABA, February 13
Even if avid tech junkies didn’t find the sizzle in the Consumer Electronics Show, tech is still a draw for retail investors. Let’s see if that trend continues during the typically high drama of earnings season.