Apple Inc. (NASDAQ:AAPL), Tesla Motors Inc (NASDAQ:TSLA), Twitter Inc (NYSE:TWTR) and Facebook Inc (NASDAQ:FB) have been Wall Street darlings, which has meant good things for investors in the past but may mean bad things starting next month. Forbes contributor Clem Chambers notes that historically, the summer hasn’t been too kind to Wall Street’s most popular stocks.
Sell in May?
May usually kicks off a big stock pullback ahead of a more bullish fall and winter market. He believes the data suggests that “something nasty” is indeed about to happen to these stocks and probably others as well. He started out by looking at the NASDAQ, which has been shooting straight upward since the beginning of the year. He observed the same thing in early 2012, and that year, the market did indeed correct itself.
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Looking at Apple stock
Chambers believes that unless Apple Inc. (NASDAQ:AAPL) releases amazing information about the iPhone 6 early, the expected May correction is going to slam the stock. The company’s heft weighs heavily on the NASDAQ, and if there’s a market sell-over, shares will fall. He said Apple bulls may be interested in buying during this time.
He does note, however, that Apple Inc. (NASDAQ:AAPL) is no longer the safest bet on Wall Street. He says it’s “firmly in orbit” and believes that it will “take a miracle or at least a long, long time” for the company’s stock to double from its current price, even assuming the seven for one stock split is taken into account.
Facebook could be in more trouble than Apple
The author believes Facebook Inc (NASDAQ:FB) could be even more vulnerable to a summer correction. He notes that the social network’s stock has continued to climb even after it paid so much to acquire WhatsApp. He compared the transaction to how Tokyo’s land prices before Japan’s property crash in the 1980s.
In fact, he even suggests that the pricey acquisition indicates that Facebook stock is “extremely overpriced.” However, he also said the “glory stocks” of the NASDAQ “make up their own rules.”
Tesla parties like it’s 2000
Chambers then pointed to Tesla Motors Inc (NASDAQ:TSLA)’s stock chart, questioning whether a picture like that ever ends well. He notes again like others have that there is no fundamental basis on which investors can base the automaker’s stock price. He calls the bull case “one of those magic-eye pictures,” he can’t ever get to work.
He agrees with most others that Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk must be a genius, but he doesn’t think the automaker’s stock price is in any way warranted.
The ups and downs of Twitter
Of course Twitter Inc (NYSE:TWTR) has only been public since November, but it shot up like a rocket and then plummeted like a rock. He said if we were in a bull market, the stock would probably bounce off $40 a share. However, since he believes a correction is coming very soon, he’s not sure that will happen. In fact, he also thinks that if Twitter does fall below $40 a share, it probably won’t “spark the sort of bearish move that would provide the environment for some dip buying. He says Twitter Inc (NYSE:TWTR) is also overvalued.
So how long might a pullback on stocks like these last? MarketWatch reports on analysis from Stephen Suttmeier of Bank of America Merrill Lynch. He said there’s over a 23% chance that the broader stock market will lose a fifth of its value between May and October. The analyst sees the largest risk for the May to October period of a correction that’s more than 10% but less than 20%, with a one in three chance of that. For a 20% correction, he sees a one in three chance of it happening between April and September and a little better than one in four chance of it happening between March and August.