Invest in These Two Giants Before Fed Policy Triggers Rush into Big Tech

Shah Gilani|May 2, 2022

I think 2022 and early 2023 will be the year of big tech growth stocks.

You heard me right. I said “growth” stocks, not “value” stocks.

Since mid-2021, the market started pricing in higher interest rates. That impacted the valuation of tech companies based on discounted cash flow pricing models. And that, in turn, drove prices down on most tech growth stocks.

Now though, with the U.S. economy posting negative GDP last week, the Federal Reserve will have to tread very carefully regarding its interest rate policy.

If the Fed indicates any dovish change in its longer-term interest rate policy, we could see a huge rush of capital back into big tech growth stocks.

I don’t think the Fed will change its narrative anytime soon (for risk of losing credibility). Still, traders are going to see the same opportunity I’m seeing, and that’s going to cause small rallies as traders start to position themselves for the future in big tech companies like this one.

Read on to learn how you can position yourself for the future with two new trades.

Amazon.com Inc (AMZN)

On Thursday, the company reported its first-quarter results that included net sales of $116.4 billion, which was basically in line with estimates of $116.3 billion.

On the bottom line though, earnings for the quarter came in at a $7.56 per share loss, versus estimates for a $8.40 profit.

That is a giant miss, representing Amazon’s first quarterly loss since 2015.

On the news, shares were down more than 12% in early Friday trading.

The company cited rising costs, supply chain constraints, and a stake in EV-maker Rivian Automotive Inc (RIVN) as weighing on the company’s numbers.

Speaking of rising costs, total operating expense for the quarter was a whopping $112.7 billion, with $20 billion in fulfillment costs alone.

I think the inflation and supply chain constraints that led to those massive operating costs will be headwinds for AMZN for the foreseeable future.

Not forever, of course, but at least for the foreseeable future, and that could continue to drag the stock down over the next month.

At some point, all of the current headwinds will get priced into the stock, and bargain-hunters will come in to start establishing new long-term positions.

If shares of AMZN trade down to $2,035 by May 20, let’s buy the AMZN June 17, 2022 $2,120/$2,140 Call Spread for $9.00 or less. Plan on selling the position for a 100% profit, or if shares of AMZN close below $1,845.

 

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Apple Inc (AAPL)

On Thursday, after the bell, the company reported quarterly results that beat analyst expectations for revenue and earnings.

On the top line, the company reported record revenue of $97.3 billion versus estimates of $93.9 billion. And on the bottom line, the company reported adjusted earnings of $1.52 per share versus $1.42 expected.

The company’s results were really good, especially considering the supply chain constraints it faced in China.

Unlike a lot of the other tech stocks, which have been knocked down since late last year (on rising interest rate fears), shares of AAPL have been trading in a range, with key support at approximately $157.00.

As I write this, the stock is trading at $161.70. If it continues to trade in its range it could easily get back up to $178.00 by the end of June.

At this point, let’s buy AAPL July 15, 2022 $165/$170 Call Spread for $2.40 or less. Plan on selling the spread for a 100% profit or if shares of AAPL close below $150.

What are you watching? Reach out to my staff and I at shah@totalwealthresearch.com or leave a comment below.

I look forward to hearing from you.

Cheers,

Shah