Over the weekend, I wrote about the explosion of dollars into index funds and how they might be impacting the market. Today, I want to discuss what else is moving stocks, and it has nothing to do with Jack Bogle.
Before we get into some of the insane shit happening around Nvidia, I want to point out something obvious but also true. Nvidia’s business has earned the run its stock is on. We can argue about how much is warranted and how much is froth, but its shares are up 275% over the last year for good reason.
In their most recent earnings report, they shared that their revenue is up 265% year over year, and their net income is up 769% over the same time period. The business is on fire.
On TCAF, we discussed NVDL, a levered single-stock ETF that offers twice the daily returns of Nvidia. To start the year, it had $220 million in assets; now, it’s at $1.4 billion.
I don’t know enough about the intricacies of this product, the gammas, the deltas, and whatnot, but this has to be impacting the underlying.
But why get only two times the daily return when you can use options and really have some fun? According to Danny Kirsch, Nvidia call volume reached 2.55 million on Friday, which is over $200 billion in notional dollars. This is definitely, definitely moving the stock.
And then there are the analyst upgrades that seem to happen every day. Today, Cantor Fitzgerald raised its price target from $900 to $1,200. The stock has 39 buys, 11 outperforms, 5 holds, 0 underperforms, and 0 sells.
And let’s not forget about the active managers who are mostly setting prices for the rest of us. Daily Chartbook was kind enough to send me these charts. To nobody’s surprise, Nvidia is the most owned semiconductor stock by active fund managers.
I was surprised to learn, however, that active managers are only slightly overweight the stock.
In fairness, it’s now the third largest stock in the index, at a 5% weight, so I guess it wouldn’t make sense for a monster overweight.
Several factors are pushing the stock higher; retail investors, option YOLOers, mutual fund managers, analysts price targets, and yes, probably index funds too.
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