Tuesday, December 27, 2016

As NVIDIA Notches Its 10th Straight Daily Gain, Lots Of People Say Nice Things...HOWEVER (NVDA)

Ten days in a row, 30%.
NVIDIA is far and away the best performing stock in the S&P 500, leading #2 ONEOK by something like 90 percentage points.

On Dec. 19th Yahoo Finance named NVDA their "Stock of the Year" in a longform article.

On Dec. 23 Quartz declared "In the race to build the best AI, there’s already one clear winner".

Today the Wall Street Journal's Moneybeat blog posted:

The New Kings of the S&P 500: Semiconductor Stocks
Move over FANG. There are new kings of the S&P 500 this year.
Semiconductor stocks have been all the rage in 2016, with the PHLX Semiconductor Index jumping more than 41%. As the sector surged, a $709 million iShares ETF tracking the index attracted $140.1 million in net new money in 2016, according to Morningstar.

The broader market has been no match for the chip-makers, even though the S&P 500 is up more than 11% this year, and the index’s technology firms are up 14%.

Sure, semiconductor firms may not have the same household recognition as Facebook, Amazon, Netflix, and Google-owner Alphabet, which all provided much-needed support to the market in 2015, and collectively earned the acronym FANG.

But chip-maker Nvidia is up over 250% in 2016, including 5.7% on Monday, making it the best performer in the S&P so far this year. What’s more, it’s already topped the 134% rise last year in Netflix, which was the best performer in 2015. (For the record, Nvidia was the fifth-best performer last year, up 64%.)

Nvidia has been benefiting from strong earnings, driven by its gaming segment which offers graphics processors used in the PCs meant for hardcore video-gamers. After its third-quarter results in November, the stock jumped nearly 30%.

The company’s also been a pioneer in developing deep learning and artificial intelligence technologies, which has excited investors, according to William Stein, technology equity-research analyst at SunTrust Robinson Humphrey. That’s been helped along by its use of software that makes it easy to develop applications with the technology.

“Right now, it seems pretty clear [Nvidia] is taking the lead, and I think it’s because of its development toolkit,” Mr. Stein said.

It’s not just Nvidia that’s getting a boost, even if it is outperforming based on its own unique circumstances.....MORE
Just to be clear, NVIDIA created those 'unique circumstances' by investing $2 billion into chip R&D for their P100 offering:

Sunday May 15, 2016
NVIDIA: A $2 Billion Chip to Accelerate Artificial Intelligence (NVDA)
First a heads-up. The technical trading gurus at Investor's Business Daily are saying take profits after Friday's big move, now 20% above their buy point. I don't think so but it all depends on your time frame.

And whether you have the discipline to buy back in should the stock not pull back.
(see links below for some of the things driving the stock)

On the other hand it's not like the stock is unknown and there are hordes of naïfs who have yet to discover it. NVDA was the fourth-best performer on NASDAQ in 2015 and through Friday is up 95% in 52 weeks and 60% since the overall market bottomed on Feb. 11.
NVDA NVIDIA Corporation daily Stock Chart
Here's some background from MIT's Technology Review, April 5:...
The stock had closed the prior Friday the 13th at $40.98 on a big earnings gap up.
And we were disagreeing with Investor's Business Daily, usually not a good thing to do.
Now however....at 116.49 up $6.71 (+6.11%) after daily and all-time top-ticks at $116.80....From IBD, Dec. 27:

Nasdaq Leads Gains, Apple Up; Did Nvidia Just Signal A Correction Is Near? 
Stocks added to recent gains with four trading days remaining in the year as a key survey on U.S. consumer confidence hit its highest level since August 2001.

Meanwhile, Nvidia (NVDA) marked its 10th straight gain Tuesday, rising more than 29% over that long stretch. On Tuesday, shares rose more than 5% to 115.93 and hit a new all-time high of 116.65.
Such a robust advance over a narrow period of time, on top of strong gains over the past nine months, is equivalent to the traditional climax run, a key IBD sell signal that carries the most weight during a market that has reached bubblelike conditions.

It's very hard to call the current equities market "bubblelike," even if so-called price-to-earnings valuations of the S&P 500 are above historical averages. Despite a quarter-point hike in interest rates earlier this month, and plans by the Federal Reserve to possibly raise rates three more times in 2017, the speed in which the money supply will tighten does not appear to be affecting the yield curve lately.

Nonetheless, Nvidia holders can decide to sell at least a portion of their position and get prepared for the inevitable correction and new base building that follows.

Normal cup bases range from a decline of 12% from high to low to as much as 33% to 35%. However, in the case of a stock as strong as Nvidia, corrections in the range of 40% to 50% or more are not uncommon. Cisco Systems (CSCO) presented such a precedent during the 1994-to-1995 market pullback; after a huge from its initial IPO base breakout in October 1990, the internet gear maker fell from 40.75 to 18.75 from March 1994 to July that year, a 54% decline....MORE
We agree and start to lighten up right here, right now.
And any weakness in the overall market means lighten up some more.