Yesterday (overnight Aussie time) the tech-heavy Nasdaq Composite Index (NASDAQ: IXIC) gained 1.0% to reach yet another new record high.
Year-to-date, the index of predominantly leading tech shares is now up more than 22%. That was almost unimaginable in mid-March, after the Nasdaq had lost more than 30% in the COVID-19 market rout.
But the remarkable rebound is indicative of the resilience of companies like Apple Inc. (NASDAQ: AAPL). Although Apple's share price dropped 0.3% yesterday, its 53% share price surge this year has seen it hit a market cap of US$1.96 trillion (A$2.72 trillion). And it's helped drive the Nasdaq to regular new record highs.
All this has been buoyed, of course, by the fiscal and monetary stimulus global governments have provided to keep their economies afloat during the pandemic.
It's also a good reminder that — unless you have a crystal ball to pinpoint the highs and lows — buying quality shares and holding them for the longer-term is the best way, in my opinion, to build your wealth. Far too many investors would have sold their shares near the March lows only to sit on the sidelines and watch share prices rebound before buying back in at a heavy loss.
ASX tech shares also shooting higher
The US may be home to the biggest tech shares in terms of market cap. But you'll find a growing number of high performing tech shares on the ASX as well.
In fact, the top 3 performing shares on the S&P/ASX 200 Index (ASX: XJO) for 2020 to date are all technology related.
Topping the list is fintech company Afterpay Ltd (ASX: APT). Year-to-date, Afterpay's share price is up 158%.
Coming in a close second is biotech company Mesoblast Limited (ASX: MSB). Mesoblast's share price is up 151% so far in 2020.
That almost makes data centre operator Nextdc Ltd's (ASX: NXT) 82% share price gain in 2020 seem mediocre. (It's not!)
And a look at how the BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC) share price has been doing shows that ASX tech shares have broadly been booming since March.
The BetaShares S&P/ASX Australian Technology ETF holds some of Australia's largest tech companies. Since its 23 March low, the ATEC share price is up 92%. (I can't give you the year-to-date figure, as the fund only listed on the ASX on 4 March.)
That covers technology shares for today. Any guesses on what the next best performing shares are involved with?
If you said 'mining', give yourself a gold star. The top 10 performing shares on the ASX 200 this year so far are all tech or mining companies.
Why Bank of America has a buy rating on BHP and RIO shares
Fortescue Metals Group Limited (ASX: FMG)'s 72% share price leap in 2020 puts it in 7th place on the ASX 200 top earners board.
BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO), on the other hand, don't even make the top 20 list. At least, not yet.
The BHP share price is up 2.3% year-to-date, while the Rio Tinto share price is up 1.2%.
But after raising its forecasts for iron ore prices through 2024, Bank of America sees value in both mining giants.
In its 7 August note, Bank of America stated (as quoted by the Australian Financial Review):
We remain at buy for Vale, BHP and Rio and recently raised price objectives on all based on strong free cash flow and the better iron ore pricing outlook.
China's voracious appetite for iron ore has continued into 2020, with government stimulus playing a key role in this further growth. Yet it is natural for that growth to eventually taper off, as China's steel consumption per capita is already higher than other regions.
Our forecasts assume 0.4 per cent steel production growth in 2021 and a 0.4 per cent drop in 2022, which temper global iron ore needs ahead. To be fair, China's demand has continued to surprise us, and in recent years our forecasts have proved conservative, so further upside risk to our outlook is possible.
Noting that Vale has some of the world's lowest cost iron mines, Bank of America cautioned that, while it doesn't expect this to occur, "If Vale were to ramp up to its full potential, it could single-handedly result in global oversupply."
Bank of America's price target for Rio Tinto is $123 per share. At time of writing, the Rio Tinto share price is $1021.77.
Bank of America's price target for BHP is $44 per share. BHP's share price is currently $39.68.
