Last weekend, I wrote about the explosive influx of dollars into index funds and how that could impact the market. Today I want to talk about what else moves stock prices, and it has nothing to do with Jack Bogle.
Before I get into the crazy things happening around Nvidia, I want to point out something obvious but true. Nvidia’s business is profitable enough to drive up its stock price. You can argue about how much guarantee there is and how much froth there is, but there’s a good reason the company’s stock is up 275% over the last year.
In its latest earnings report, it shared that its revenue grew 265% year-over-year and its net income grew 769% over the same period. Business is on fire.
upon TCAFSo we talked about NVDL, a leveraged single-stock ETF that offers twice the daily return of Nvidia. At the beginning of the year, assets were $220 million. Now it’s $1.4 billion.
I don’t know enough about this product’s complexity, gamma, delta, etc., but this must be affecting something underlying.
But why are you only getting twice the daily return when you can really enjoy using options? According to Danny Kirsch, Nvidia’s call volume on Friday reached 2.55 million, which is More than $200 billion in notional value. This is definitely going to move the stock price.
And analyst upgrades occur on a daily basis. Today, Cantor Fitzgerald raised its price target to $1,200 from $900. This stock has 39 Buys, 11 Outperforms, 5 Holds, 0 Underperformers, and 0 Sells.
And don’t forget about active managers who are primarily setting prices for the rest of us. daily chart book He was kind enough to send me these charts. To no one’s surprise, Nvidia is the most-held semiconductor stock by active fund managers.
But we were surprised to learn that active managers are only slightly overweight stocks.
To be fair, this stock is currently the third largest stock in the index with a weight of 5%, so I don’t see any point in overweighting Monster.
Several factors are driving the stock price higher. Individual investors, option YOLOers, mutual fund managers, analyst price targets, and perhaps even index funds.
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