Don't fall for the NarrativeThere's a general narrative going around of "buy the dip" and "look at these undervalued stocks". The goal here is not to compare Facebook to Microsoft to Paypal as companies, but to look at relative price structure between a handful of popular stocks. In this case, we have a few giant companies; Tesla , Facebook and Microsoft , charted against the smaller Paypal and Netflix , and which have taken a recent beating (along with Facebook ). The lines in the chart are an 1800 week linear regression of Microsoft's per-dollar performance relative to the M2 . The lines don't mean anything and are merely a rough guideline of history-projected asset strength. The prices are M2 adjusted to account for money supply expansion.
Facebook has been underperforming since 2018 after making a huge run in 2013 onward, but the notion that "it's a good deal" hardly stands up if you look at the relative trajectory of Microsoft and Tesla . Facebook was one of the biggest to rise, and was one of the first to fall. Microsoft on the other hand has a huge history of being an efficient capital allocator, and will probably be one of the last to fall. Let's ask the question: If Microsoft and Tesla make the same correction as did Paypal and Facebook , do you think Paypal and Facebook will be lower or higher following this hypothetical correction? The gut feeling here is that Paypal/ Facebook / Netflix /Peloton etc. COULD end up falling even more, given that many of these larger cap stocks are still standing well. I would rather short Tsla / Msft than long Paypal/ Facebook / Netflix /Peloton etc. given the current environment.
It's easy to want to fomo into these stocks when you look at a year or two of history, but I think this paints a more realistic picture.
Good luck and hedge your bets :)
Note: The arrows are not price targets, just medium term directional indicators.
