Crowded Stocks Apple, Alphabet, Microsoft Still A Buy: Bernstein
Alphabet, Facebook, Intel, Amazon.com and Apple ( AAPL ) rank among the most “crowded” technology and telecom stocks globally, says a Sanford Bernstein research report, which notes that Hewlett Packard Enterprise and Sprint are among the least-crowded large-cap stocks. The Bernstein report says investors should keep in mind what stocks are “crowded,” or highly concentrated, amid market volatility. Still, being among the most crowded doesn’t rule out a favorable stock rating for a stock. So-called crowded stocks are often called growth and momentum stocks. And high institutional ownership is usually a good thing, as IBD’s Investor’s Corner can tell you. “We believe it’s important for investors to include ‘crowding’ as a consideration for their portfolio strategy, especially for technology (which is very crowded), to improve diversification, mitigate downside risk and potentially enhance returns,” said Bernstein analyst Mark Moerdler in the report. The worry with heavily owned stocks is that, given high valuations and high growth expectations, they might take a hit if investors exit the stock market during a broad sell-off. Other analysts at Bernstein rate Alphabet ( GOOGL ) and Amazon ( AMZN ) stocks as a buy, Facebook ( FB ) neutral and Apple outperform, even though Apple also is on the crowded list. Intel ( INTC ) has a hold rating from Bernstein, while Microsoft ( MSFT ) has a buy. On Apple, Moerdler wrote: “The stock has underperformed over the last quarter due to fears of iPhone weakness, which we believe is now largely priced into the stock.” Microsoft “has become increasingly crowded over the last few quarters as investors and sell-side analysts have come to realize the massive opportunity for Microsoft to grow long-term EPS as the company moves to cloud and subscription revenue,” Moerdler said. Among software stocks, he says, “companies that have greater exposure to cloud and recurring revenue (are) showing the most crowding.” According to Moerdler: “Crowded stocks react less positively to good news than un-crowded stocks, but overreact negatively to bad news more so than un-crowded stocks.” Sprint ( S ) and Hewlett Packard Enterprise ( HPE ) have market perform ratings at Bernstein Research.