At a glance:

• All three US major indices rebounded from their September sell-offs before closing lower towards end-October.
• Tech players continued to dominate trading in October. Tesla (TSLA.US) was still one of our clients’ top favourites.
• Amid daily resurgences of COVID-19 and US election vagaries, volatility has spilt into November.

 

Here are October’s top 10 US stocks on Phillip’s Online Electronic Mart System (POEMS), based on gross market value traded.

All three US major indices – Dow Jones, S&P 500 and Nasdaq Composite – rebounded from their September sell-offs, before closing lower towards end-October. The Chicago Board Options Exchange’s CBOE Volatility Index – or VIX – crossed 40 points for the second time since June 2020. This signals fears in the market. The fear coincided with COVID-19’s new daily record cases in the US. With Joe Biden winning the election, volatility in the market may still persist due to record surge in COVID-19 cases and legal challenges from Donald Trump on the election outcome.

Tech players continued to dominate the list, especially electric-vehicle makers. Investors continued to favour the two most popular makers, Tesla and Nio. This could reflect two things: tech’s increasingly important role in economic growth and trading opportunities from the general volatility of tech stocks.

Starting from the 10^th position:

10^th: Alibaba Group Holding Ltd (NYSE: BABA)

Alibaba, one of the most talked-about companies in October, briefly caught up. It made it to the last spot in the month’s list. Its share price was more stable than the rest. Despite moving just 5-6%, Alibaba crossed the US$300 mark to break a new high of US$319.32 on 27 October.

This run-up likely had to do with ANT Group’s IPO. Spun off from Alibaba in 2011, Alipay was rebranded as Ant Financial in 2014 and further as Ant Group for its listing in Shanghai and Hong Kong. This will be the worlds’ biggest IPO by far. In a sudden twist of events, however, the company announced two days before listing that its IPO has been suspended until further notice, to meet additional listing or disclosure requirements.

Alibaba released its quarterly results on 5 November which beats analysts’ estimates by close to 30%. Singles’ Day will be hosted this week on 11 November and it is the world’s largest 1-day shopping event. The two events will definitely draw investors’ interest back to the stock.

9^th: Boeing (NYSE: BA)

Boeing has returned to the list at last, claiming the 9th spot. Its share price hovered at US$160-170 before falling sharply towards month-end due to its losses and lay-off plans.

Results released on 28 October beat analysts’ estimates but the aircraft maker still lost US$754mn. Revenue fell by US$5.8b or 29% YoY as COVID-19 continued to put off air travel. Boeing also announced 7,000 job cuts on top of the 19,000 jobs it let go earlier this year.¹

US election results could potentially affect its revenue pathway. This is because a big chunk of Boeing’s revenue comes from the defence sector. A Donald Trump’s loss may have a negative impact as Boeing stands to benefit from potentially increased government spending on defence.

8^th:Facebook Inc. (NASDAQ: FB)

Interest in Facebook is fading. The stock has been falling one position behind for three months. It slipped from 6th position in August to 7th position in September and further to the 8th spot this month. Its share price dangled between US$260 and US$280 in October, down 10-15% from an all-time high of US$304.67 on 26 August.

Since the market’s September sell-off, Facebook has not recovered as much as the other tech stocks. Concerns still linger around Congress scrutiny of censorship and the spread of misinformation issues. Twitter’s and Google’s chiefs had also been summoned for questioning by the Senate.²

Facebook took a further hit after its earnings release on 29 October. Despite higher revenue and net income, its shares shed as much as 7% on 30 October due to its weaker forward guidance.³

7^th: Amazon (NASDAQ: AMZN)

The e-commerce giant claimed the 7^th spot on POEMS this month. Shares rose to US$3,496.24 on 13 October but closed lower near the US$3,000 mark towards month-end.

The platform provider has been performing well as consumers have accelerated their shift to online shopping during the pandemic. On top of e-commerce, businesses are gearing towards cloud computing, which Amazon is targeting next. Mirroring Facebook, its share price dipped after announcement of its quarterly results. Amazon said its Q4 profits are likely to be disappointing and investors accordingly priced in the information.⁴

6^th: CrowdStrike Holdings Inc. (NASDAQ: CRWD)

Cybersecurity tech company, CrowdStrike, maintained its 6^th place. CrowdStrike rebounded strongly from its September sell-off to a new high of US$153.9 on 14 October. It gave up its gains later in October after a wave of share disposals by its board members, CEO and Chairman.

A product presentation on 15 October suggests the company is seizing the cloud-security opportunity. CrowdStrike estimates that cloud-security spending globally will grow by 10x in three years’ time. It is positioning itself to capture a slice by expanding its cloud-computing capabilities aggressively.⁵ CrowdStrike has yet to turn a profit and the market is eagerly anticipating its first profitable quarter in the coming season.

5^th: Zoom Video Communication (NASDAQ: ZM)

Zoom slipped one spot from its 4^th position in August but it share price continued to rise. It touched a new record of US$588 on 20 October. Due to its high valuation of more than 600x price to earnings, Zoom’s share price fluctuated wildly, with daily waxing and waning amid market volatility.

With COVID-19 worsening in many parts of the West, lockdowns will only serve to further demand for its products and services, to enable remote working and learning. Zoom’s share price thus appears poised to zoom further.

4^th: Apple Inc. (NASDAQ: AAPL)

Apple slipped two positions to No. 4. Its share price has been under pressure since its stock split in September. Ever since, Apple has not traded near its record high of US$138 in early September. Its share price flip-flopped between US$110 and US$120 throughout the month and went below US$110 after its earnings announcement.

Apple’s new iPhone 12 on 23 October that came with in-built 5G capabilities failed to wow markets. This caused its share price to tank 6%⁶, even though results beat estimates. iPhone sales declined 21% YoY in the quarter⁷. That said, the drop could also have been due to customer anticipation of its new release. Tim Cook remains optimistic about the iPhone 12 for a number of reasons: 5G support, carrier promotions and a loyal installed base⁸.

3^rd: Square Inc. (NYSE: SQ)

Square Inc. squeezed to the top 3 this month. This financial-service company focuses on digital payment, which has reaped dividends from the migration to smart payments amid the pandemic.

Square is one of the top-performing payment companies this year. Its share price skyrocketed to US$190 on 13 October, before letting off some steam and retracing 13%.

Recently, Square further expanded into cryptocurrency. It bought US$50mn worth of bitcoins, representing about 1% of the company’s total assets. The company believes that cryptocurrency aligns with its mission of providing a way for participation in the global monetary system⁹. It is taking steps to provide the transformational technology of cryptocurrency, which may or may not turn out to be the world’s single currency within the next decade.

2^nd: Nio Inc. (NYSE: NIO)

The ‘Tesla of China’, Nio clinched the second position in October. Nio’s share price popped by 26% on 14 October after a bullish report by JP Morgan. JP upgraded this premium electric-vehicle maker from Hold to Buy with a price target of US$40,¹⁰ citing Nio’s specific premium electric car segments which will put it at a distinct advantage along with the company’s financial strength and backing by Chinese economic development authorities¹¹. From there, the stock continued its meteoric rise to trade at a record US$32 on 30 October.

China’s electric-car market is vast. Nio is expected to be a long-term winner in its premium space on account of its best financial position among the car makers in China¹². Nio’s car also gave rise to the least amount of problems relative to other Chinese EV manufacturer¹³. Both contributed to Nio’s popularity in cars and stock. It delivered 31,430 vehicles in October, representing 111% YoY growth.¹⁴ Other Chinese EV makers such as Li Auto (LI) and Xpeng (XPEV) trailed behind. In the latest quarter, Nio delivered 12,206 vehicles versus Li Auto’s 8,660 EVs.

1^st: Tesla Inc (NASDAQ: TSLA)

For the fourth consecutive month, Tesla topped the charts. The world’s most valuable carmaker had a roller-coaster ride in October. It recently stalled in the low US$400s after peaking at US$460 a week before its earnings announcement.

Tesla announced on 21 October yet another profitable quarter with record deliveries. This was its fifth consecutive month of profits. The company is still on track to sell half a million cars by the end of this year, though Tesla bears would argue that reaching the US$500k mark could be a tall order during this economic recession. This partly explains its dip of 9% from its October high of US$461 even though earnings beat. In a bid to reach its year-end goal, Tesla has reportedly begun shipping made-in-China cars to Europe. The first 7,000 cars are scheduled to reach Belgium at the end of December, before planned deliveries to other parts of Europe.

 

Reference:

• ^[1] https://edition.cnn.com/2020/10/28/investing/boeing-job-cuts-losses-earnings/index.html
• ^[2] https://www.bbc.com/news/technology-54721023
• ^[3] https://edition.cnn.com/2020/10/29/tech/facebook-earnings/index.html
• ^[4] https://markets.businessinsider.com/news/stocks/amazon-stock-price-q3-earnings-forecast-coivd-costs-revenue-sales-2020-10-1029746619#
• ^[5] https://ir.crowdstrike.com/static-files/c4082fcc-e68e-453f-a32c-1824e3dc4728
• ^[6] https://www.cnbc.com/2020/10/29/apples-weak-iphone-sales-show-people-were-waiting-for-the-new-models-.html
• ^[7] https://www.cnbc.com/2020/10/29/apples-weak-iphone-sales-show-people-were-waiting-for-the-new-models-.html
• ^[8] https://www.cnbc.com/2020/10/29/apple-aapl-earnings-q4-2020.html
• ^[9] https://news.bitcoin.com/square-bitcoin-50-million/
• ^[10] https://www.barrons.com/articles/buy-nio-stock-because-price-can-double-electric-vehicles-51602681155
• ^[11] https://admiralmarkets.com/analytics/traders-blog/nio-shares-upgrade
• ^[12] https://cntechpost.com/2020/09/06/how-do-chinese-customers-choose-between-nio-li-auto-and-xpeng/
• ^[13] https://investorplace.com/2020/10/nio-stock-is-intriguing-but-it-isnt-worth-buying-now/
• ^[13] https://markets.businessinsider.com/news/stocks/nio-stock-price-record-doubles-car-deliveries-in-october-2020-11-1029753837

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