Déjà vu – Will Tech Stocks and ETFs Crash Again?

Watching tech stocks lead the market resurgence in the first six weeks of Q1 2023, I was hit with a flash of déjà vu. Just six months ago, the market slaughter of the first six months of 2022 was led by a strong upsurge in the first six weeks of 2022 by beaten-up growth stocks.  It didn’t last. Those same stocks led the market back down to new lows between August 16 and September 30. Conversely, when stocks finally surged during parts of the fourth quarter, it was value and high-income stocks that led the comeback as tech stocks continued to flounder.

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The first six weeks of 2023 looked about the same while weeks 7 and 8 have eaten those gains. Some “innovative” and “next generation” ETFs still have impressive returns nearly two months into the quarter.  Most had performed very poorly during the prior 10 months.

To illustrate the point, let’s take a look at 15 of the top performing non-leveraged US stock ETFs this year to-date in comparison to their 12-month returns.

Current ValuEngine reports on these stocks or ETFS can be viewed HERE
Ticker ETF Name YTD Return 12-Month Return VE Rating
BITQ Bitwise Crypto Innovators 61.29% -62.43% N/A
BKCH Global X Blockchain 59.72% -65.99% N/A
ARKW ARK Next Gen Internet 31.57% -34.98% 1
ARKK ARK Innovation 26.96% -34.91% 1
MEME RoundHill Meme Stock 25.38% -41.92% N/A
ARKQ ARK Autonomous & Robotics 20.08% -18.00% 1
SOXX iShares Semiconductor 18.88% -7.55% 1
XWEB SPDR S&P Internet 17.99% -34.19% 5
PSCD Invesco S&P Small Cap Discretionary 17.23% -0.76% 1
PNQI Invesco NASDAQ Internet 15.99% -18.87% 4
XITK SPDR FactSet Innovative Technology 15.83% -23.44% 2
XSD SPDR S&P Semiconductor 15.48% -1.77% 1
QTEC First Trust NASDAQ-100 Technology Sector Index 13.63% -17.66% 1
XTN SPDR S&P Transportation 13.29% -10.42% 1
SPHB Invesco S&P 500 High Beta 12.77% +1.10% 1
QQQM Invesco Nasdaq 100 11.46% -9.20% 1
IVV iShares Core S&P 500 4.76% -3.46% 3
Current ValuEngine reports on these stocks or ETFS can be viewed HERE


  1. The top two ETFs in the table above, BITQ, Bitwise Crypto Innovators ETF and BKCH, Global X Blockchain ETF have both gained a spectacular 50+% in 2023 thus far. Yet, even counting those impressive two months, they have the worst 12-month returns by far.  They’ve both lost almost 2/3 of their value from the end of February 2022.
  2. ARK Investment Management, one of the best known active-ETF-only firms, has three of the next four top performing ETFS. ARKW ARK Next Gen Internet ETF, ARKK, its flagship ARK Innovation ETF and in sixth place, ARK Autonomous & Robotics ETF.  From a return-comparison perspective, the stories are similar proportionately although lesser in magnitude. 2-month returns from 20% to 32% reducing the losses of the past 12-months to “only” -18% to -35%.  Index ETFs in the Sector were not exempt to the same kind of treatment. QTEC, the First Trust Nasdaq-100 Tech Sector Index ETF shows a similar pattern although lesser in magnitude. The ValuEngine predictive model seems unimpressed by the recent turnarounds.  All six of the ETFs discussed thus far get our lowest rating 1 (Strong Sell) for year-ahead performance.  Although four slots further down in this table, all of the above also holds for XITK, SPDR FactSet Innovative Technology. It has lower returns in both categories and the same dismal prognosis of a 1 ratingAll of these have outperformed QQQM representing the Nasdaq-100, a popular benchmark for the tech sector, in the past two months. But under performed it badly for the past 12 months.
  3. The two semiconductor ETFs, SOXX and XSD, also are rated 1 (Strong Sell) despite being among the year-to-date price return leaders. While they also posted negative returns last year, they were of much lower magnitude. SOXX, one if the iShares by Blackrock, has a better 1-year return than the Nasdaq-100 while XSD has a better 1-year return than the S&P 500 and is just barely negative at -1.9%
  4. Two sectors with very little in common with technology also made it to this table.  They are PSCD, Invesco S&P Small Cap Discretionary ETF, and XTN, SPDR S&P Transportation ETF.  Neither are liked by ValuEngine’s predictive models as both are rated 1 (Strong Sell). PSCD stands out as having weathered the storm better than most ETFs, losing just 0.7%. This is considerably better than benchmark ETFs QQQM and IVV.
  5. That leaves us with just one more ETF rated as a Sell or Strong Sell in this table. I must admit I not only found the numbers counterintuitive but almost shocking.  SPHB, the Invesco S&P High Beta ETF, is designed to provide a return similar to 50% higher than the S&P 500 when the market is up and 50% lower (worse) when the market is down.  In selecting constituents for the underlying index, trailing daily price changes over the past 12 months are used to calculate the S&P 500 constituents’ betas. Such constituents are then ranked in descending order of their betas wherein the top 100 securities finally form the index. Its weighting methodology is also designed so each constituent is set proportional to its beta — all these in an attempt to magnify market movements. Since the S&P 500 return was -3.5% for the 1-year period, a target expectation for SPHB’s return during the period would be to multiply -3.5% by 1.5 for an expected value of -5.25%.  Instead, it was the top performer in the table for the 12-month period and the only one with a positive return, +1.1%.  Nevertheless, its VE Rating is 1 (Strong Sell).
  6. Perhaps just as unexpected is the fact that the two ETFs in the table with Buy Recommendations are both Internet ETFs.  The top-rated ETF is XWEB, SPDR S&P Internet ETF which tracks an equal-weighted index of US internet retail, software, and services companies. XWEB currently is rated 5 (Strong Buy). Among its top 10 holdings are two stocks with 4 (Buy) recommendations: BIGC. BigCommerce Holdings and TRIP, Trip Advisor.  The second ETF in this category, PNQI, is similar but uses modified market=cap weighting with a group of largely overlapping stocks. PNQI is rated 4. It holds another stock with a buy rating of 4, CDAY, Ceridian HCM Holdings.
Current ValuEngine reports on these stocks or ETFS can be viewed HERE

Let’s take a closer look at these three stocks.

BIGC – BigCommerce Holdings, Inc. operates a software-as-a-service platform for small businesses, mid-markets, and large enterprises in the United States, Europe, the Middle East, Africa, the Asia-Pacific, and internationally. The company’s platform provides various services for launching and scaling e-commerce operations, including store design, catalog management, hosting, checkout, order management, reporting, and pre-integrations. As of December 31, 2021, it served approximately 60,000 online stores across industries. BigCommerce Holdings, Inc. was founded in 2009 and is headquartered in Austin, Texas. It was taken public in November 2020 and has floundered badly since its IPO.

CDAY – Ceridian HCM Holding Inc., together with its subsidiaries, operates as a human capital management (HCM) software company in the United States, Canada, and internationally. It offers Dayforce, a cloud HCM platform that provides human resources (HR), payroll, benefits, workforce management, and talent management functionality; and Powerpay, a cloud HR and payroll solution for the small business market. The company also provides Bureau solutions for payroll and payroll-related services. It sells its solutions through direct sales force and third-party channels. The company was incorporated in 2013 and is headquartered in Minneapolis, Minnesota.

TRIP– Trip Advisor, Inc. operates as an online travel company, primarily engaged in the provision of travel guidance products and services worldwide. The company operates in three segments: TripAdvisor Core, Viator, and The Fork. The TripAdvisor Core segment offers travel guidance platforms for travelers to discover, generate, and share authentic user-generated content in the form of ratings and reviews for destinations, points-of-interest, experiences, accommodations, restaurants, and cruises. Viator’s segment provides pure-play experiences online travel agency that evaluates businesses and enables travelers to discover and book tours, activities, and attractions from experience operators. The Fork segment provides an online marketplace that enables diners to discover and book online reservations at restaurants. TripAdvisor, Inc. was founded in 2000 and is headquartered in Needham, Massachusetts.

Company Name BigCommerce Holdings Ceridian HCM Holdings Trip Advisor, Inc.
Market Cap, (Bllns.) 0.7 11.1 3.0
ValuEngine Rating 4 4 4
VE Forecast 1-mo. Price Return +0.66% +0.56% +0.78%
VE Forecast 3-mo. Price Return -0.16% +5.83% +1.81%
VE Forecast 1-yr. Price Return +7.96% +6.75% +8.59%
Last mo. Price Return -20.16% -0.15% -5.06%
Last 3 mo. Price Return +8.28% +9.03% +9.93%
Last 6 mo. Price Return -49.86% +15.27% -14.19%
Historic 1-Yr. Price Return -63.27% +2.95% -19.11%
Historic 5-Yr Ann. Price Return N/A +17.43% -7.95%
Volatility 61.5% 41.9% 53.2%
Sharpe Ratio -1.52 0.42 -0.15
Beta N/A 1.50 1.34
Undervaluation Percentile N/A 23 79
EPS Growth% 25.8% 376.1% 198.44%
Price/Earnings Growth (PEG) 0.30 1.82 0.51
P/B Ratio 10.3 5.3 3.7
P/E Ratio n/a 33.9 101.3
Forward P/E Ratio 247.5 76.5 16.7
Price/Sales Ratio 2.5 8.9 2.2
Div. Yield 0.0% 0.0% 0.0%
Current ValuEngine reports on these stocks or ETFS can be viewed HERE


  1. The strongest point for all three of these companies is earnings growth.  Amidst market commentary fixated on lower-than-expected year-over-year earnings growth, these companies have expanded their growth from low bases and seem poised to continue to outpace the median US stock in earnings growth.  That said, these are small-to-midcap stocks that do not pay dividends and have above-average price volatility. While the ValuEngine 4 rating indicates they are all above-average buying opportunities at this time, only CDAY would be appropriate to even consider for very conservative portfolios.
  2. Looking backward, Ceridian, CDAY, has been the only stock of the three to show a profit last year and a profit over the past 5-years.  Its five-year annualized return of 17.4% easily beats the 11.2% five-year annualized return posted by IVV, the iShares S&P 500 ETF.
  3. Trip Advisor (TRIP) looks the least expensive of the three on a valuation basis both on traditional metrics and according to ValuEngine’s valuation model. TRIP also has the highest projected one-year return.
  4. The hoopla surrounding BigCommerce’s (BIGC) 2020 IPO is all but forgotten as the firm has lost more than 60% of its introductory market value. Lately, revenues have been increasing and it may be in the early stages of a great turnaround.  Nevertheless, BIGC should be considered a highly speculative investment.
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Our predictive models currently have very few highly ranked stocks and ETFs in the Technology Sector.  It appears as if the sector may have gotten out of the gate well ahead of itself.  That said, the model is identifying a few stocks and ETFs focused on internet services that it can recommend.  As profiled, the top-ranked stock opportunities range from semi-volatile midcap to very speculative small cap so always perform your own analysis and the suitability for the account under consideration.

The big picture remains murky.  Putting the QQQM and IVV returns for the first six weeks of the third quarter of 2022 (July 1 – August 15, 2002) side-by-side with this quarter, the patterns having QQQM shooting ahead of the S&P 5-00 (as measured by IVV) seem eerily familiar.  The reversal of the past two weeks saw losses very similar although not quite as steep to the collapse between August 15 – August 31 2022.  Déjà vu all over again?

There are many economic reasons why many predict 2023 will be as bad or worse than 2022.  The ValuEngine model currently predicts in the neighborhood of -3% retreat for IVV’s price for the next 12 months. Therefore, we don’t really expect double digit declines in the averages again this year.  Of course, we can’t rule them out either.  Market predictions are just semi-educated guesses even when they are performed by quantitative models.

By Herbert Blank
Senior Quantitative Analyst, ValuEngine Inc
All of the approximately 5,000 stocks, 16 sector groups, 140 industries, and 600 ETFs have been updated on www.ValuEngine.com
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