Investor who bet on “big techs” shares suffers from bad market

The release, in October 2020, for small investors to invest in BDRs – receipts that represent shares of companies listed on the United States Stock Exchanges – accelerated the search of Brazilians for assets linked to technology giants.

However, what was initially seen as an option to diversify the portfolio turned into a risk, given the bad moment of the “big techs” papers abroad.

That’s because, after several years with business hitting successive highs in American markets, today the movement is down, driven especially by companies like Netflix, Meta and Spotify.

The problem of technology companies can be seen by the difference in the behavior of the main indices of the New York Stock Exchange.

While the S&P 500, which brings together the largest companies listed in the US, is down 8% in 2022, the Nasdaq, which is dominated by technology companies, is down nearly 12%.

Many Brazilians were hit by the wave. According to B3, the number of investors with BDRs grew 151% in 2021, totaling 306,100 people.

In January, there was a new high of 6%, reaching 325 thousand people. This public has invested around R$ 23 billion in these receipts.

When the current number of applicators is compared to that of October 2020, the month in which the assets were released to the entire market, the growth exceeds the 10,000% mark.

According to experts, this retracement scenario should not change in the short and medium term. The main reason is the prospect of rising interest rates in the US.

With local inflation soaring, the Federal Reserve has indicated a series of rate hikes in the coming months.

As a result, money becomes more expensive and scarce, making companies that need to raise funds to finance their growth experience difficulties.

Model questioned

This is where the main problem for many technology businesses comes in: big investors are starting to question the idea of ​​accelerated growth without profitability.

“The time when investors accepted these theses has passed, and these companies are being questioned more. We see some already moving, such as Facebook itself changing its name to Meta to show the path it intends to follow from now on”, says Jennie Li, stock strategist at XP Investimentos.

And the fall should persist for some time, according to analysts. XP made an estimate that, if the 10-year real interest rate in the US goes from the current level (-0.5%) to zero, the American Stock Exchange should fall another 15%, with technology companies as the main affected.

“It is a somewhat delicate situation: either companies return to delivering growth at the pace they were doing previously, or else they will need to improve their profitability in order to reach their previous values”, says Rodrigo Lima, an analyst at Stake.

Most big tech companies are worth less today than they were at the close of 2021, but some suffer more than others.

Netflix and Spotify, for example, have dropped more than 30% since January. Meta saw its shares fall 25% in a single day, after announcing that Facebook had lost users for the first time in history, as well as a billion-dollar loss on its virtual reality unit.

André Kim, manager of Geo Capital, warns that those who are not prepared for volatility should avoid these assets. But for the long-term investor, it might be a good time to jump in.

“The Meta, for example, is being traded by multiples (a metric that the market uses to compare the share price and operational variables) much lower than those of Alphabet (which owns Google)”, he says.

The information is from the newspaper O Estado de S. Paulo.

Source: CNN Brasil

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