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You Can Realize Real Diversification Buying Tech Stocks

May 24, 2019

Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions
Better Data for Better Investment DecisionsBetter Data for Better Investment Decisions

 

  • We decided to take a look at how US large-cap tech stocks have been performing this year and how their price moves might be related.
     
  • Since we LOVE our AI model, we decided to play around with a clustering AI methodology called Affinity Propagation.
     
  • It is different than K-Means and applies a unique approach to determining how assets might cluster.
     
  • Unlike K-Means, the Affinity Propagation sets its own number of cluster.

 

We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.
We Crunch the Numbers, You Make the Trade.We Crunch the Numbers, You Make the Trade.

 

 

  • Not surprised to see the Semiconductor stocks overlapping each other in Cluster 2.
     
  • It is not intuitive to see Apple (AAPL) grouping with other mega-cap tech services companies.
     
  • Apple is rated "Attractive" in our US Large-Cap Global Top Stock Ideas and "Top Buy" in our US Information Technology Global Top Stock Ideas. 
     
  • It is interesting to see the dispersion with cloud computing stocks.
     
  • Perhaps this a function of size or general market exposure?
     
  • While the chart may be confusing, for the layperson there is one MAJOR takeaway: you can realize REAL diversification investing in US Large-cap tech stocks.
     
  • A smart investor would invest across the different clusters.

Affinity Propagation Clustering of Russell 1000 Tech Stocks

Affinity Propagation Clustering Chart


 

Cluster Tickers in Cluster
Cluster 1  ADBE, INTU, MSFT, PAYX, PS, PTC, SYMC, CRM, GWRE, MSI, TDC
Cluster 2  AMAT, AMD, CY, KLAC, LRCX, MKSI, MRVL, MU, NVDA, ON, TER, WDC, JBL
Cluster 3  AVT, COMM, FSLR, NXPI, TRMB, ZBRA, ARW, NCR, XRX
Cluster 4  CDK, CLGX, IT
Cluster 5  CGNX, COHR, IPGP, LFUS
Cluster 6  FISV, FDC
Cluster 7  FEYE, NATI
Cluster 8  NTAP, HPE, PSTG
Cluster 9  QCOM
Cluster 10  SABR
Cluster 11  SATS
Cluster 12  CDNS, SNPS, KEYS
Cluster 13  PFPT, ADSK, CSCO, CTXS, DOCU, FFIV, FTNT, LOGM, NTNX, NUAN, RP, SPLK, TWOU, WDAY, DATA, DELL, PANW, VMW
Cluster 14  ADI, AVGO, INTC, MCHP, MPWR, MXIM, QRVO, SWKS, TXN, XLNX, APH, DLB
Cluster 15  UBNT
Cluster 16  CNDT
Cluster 17  ESTC
Cluster 18  ANSS, AZPN, CDW, PEGA, SSNC, VRSN, ANET, BAH, CDAY, EPAM, FICO, G, GDDY, TWLO
Cluster 19  AAPL, FLIR, ADS, DXC, GLW, HPQ, IBM, JNPR
Cluster 20  LDOS
Cluster 21  ADP, AKAM, CTSH, DOX, EEFT, JKHY, OLED, PYPL, ACN, BKI, BR, FLT, GPN, MA, ORCL, SQ, TSS, TYL, V, WEX
Cluster 22  RHT
Cluster 23  SWCH
Cluster 24  VSM
Cluster 25  FIS, WP
Cluster 26  WU
Cluster 27  MANH, OKTA, TEAM, NOW, PAYC, RNG, SWI, ZEN

 

 

Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS
Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS