Never Say Never Again: Some Of The Most Amazing Divergences Over The Past 25 Years



  • As investors, we are all victims of old-traditional myths, beliefs, hopes and perceptions. Some have merits, some don't.
  • When a major change happens - it's sometime harder to comprehend it than to identify it. We see it but we don't adjust to it.
  • The stock market is full of divergences. As a matter of fact, this is what is making a market.
  • Nonetheless, you don't want to get caught at the wrong side of the divergence when it happens. The cost might be very high.
  • Lesson? We have 007 conclusions for you.

In my last FAANG-related article's thread there was a discussion regarding the longevity and sustainability of certain leading companies from very different sectors - Facebook (FB) versus Wal-Mart (WMT).

If I'm to sum up the discussion it evolves about three main questions:

  • Within which type of sector/industry (old-traditional versus new-innovative) it's easier for a leader to maintain its leadership?
  • Do we have a longer and clearer view when we try to foresee the future of a leading corporation belonging to an old-traditional versus new-innovative sector?
  • What can derail leading companies belonging to different (old-traditional versus new-innovative) sectors and are the potentially derailing factors completely different from each other?

Interesting questions indeed.

Truth is, there are no ultimate rules or guidelines to follow when it comes to divergences. We are all very smart retrospectively but it's much more difficult to identify a divergence in real time.

Furthermore, in many cases a new divergence marks the end of an opposite one.

In this article we are touching upon some of the most incredible divergences we've have witnessed over the past 25 years. We intentionally haven't tried to put up the most shocking numbers (it's easy to find much more extreme cases than we did) rather to point at certain events/developments that the relevant-affected stocks (and, in most cases, the world as a whole) never been the same anymore.

S&P 500 (SPY) versus Gold (GLD)

About seven years ago the SPDR Gold Trust ETF was the largest ETF in the world with ~$77.5B assets under management (AuM). At that time, the second largest ETF in the world was the SPDR S&P 500 Trust ETF with "only" ~$76.5B of AuM. Today, SPY has ~8.4x more AuM than the GLD.

ChartSPY Total Assets Under Management data by YCharts

Realty Income (O) versus CBL & Associates (CBL)

Two brick and mortar retail eREITs (VNQ) but while the former is focusing on the higher end of the retail space, the latter is engaged with the lower-end of the segment. The result? Over the past twelve years O's shareholders have been very happy shoppers while for CBL's shareholders this has been a long-sad sale with finding any bargain.

ChartO Total Return Price data by YCharts

Technology Select Sector SPDR® ETF (XLK) versus Energy Select Sector SPDR® ETF (XLE)

The past four years have seen a major divergence in the market. The energy sector, one of the old and most reliable sectors, has lost its appeal (alongside the declining energy prices) for the young, innovative and jumpy technology sector. There were no fireworks when it comes to the energy sector.

ChartXLK Total Return Price data by YCharts

Apple (AAPL) versus BlackBerry (BB)

Ten years ago, Blackberry was a world-leading manufacturer of smartphone. Most large corporations across the world still used BB as their main/sole business supplier.

Ten years ago AAPL's market-cap wasn't much above 2x the market-cap of BB. Last year, at the peak, the ratio was over 200x...

Total Returns during that past 10 years: AAPL +766.1%, BB -90.5%...

ChartAAPL Total Return Price data by YCharts

Netflix (NFLX) versus Blockbuster (BBI)

We have everything that Netflix has, plus the immediate gratification of never having to wait for a movie - Blockbuster CEO, January 2007

It was January 15th 2007 when Netflix announced that it will launch a streaming video. Since then Netflix has returned over 12,700%. Meanwhile, Blockbuster has disappeared...

ChartNFLX data by YCharts

Snap (SNAP) versus Twitter (TWTR)

Snapchat, the second-largest US-based technology IPO, went public on March 2nd, 2017. Back then, Twitter market-cap was $11B versus Snapchat's $28B. 500 days later and Twitter market-cap has tripled to over $33B while Snapchat market-cap is ~40% off to less than $17B

ChartSNAP Market Cap data by YCharts

Amazon (AMZN) versus Barnes & Noble (BKS)

Remember the small online book seller, called Amazon,com, that was founded on ‎July 5th, 1994 and went public on May 15th, 1997? Since the business was, back then, all about selling books it was often compared to the giant (brick and mortar) book seller Barnes & Noble.

Why Barnes & Noble May Crush Amazon - Fortune, September 29th, 1997Once you look beyond the Website you begin to see why, in this battle at least, the odds favor the $3-billion-a-year Goliath.

During the 21+ years since Amazon's IPO, the total return of BKS is -6.43% while that of AMZN is +92,450%...

ChartAMZN Total Return Price data by YCharts

Deutsche Bank (DB) versus JPMorgan (JPM)

Over the past few weeks I've touched upon the once-leading German bank twice (the last time can be found here). The below chart is taken from the first article, "The Italian Job - Part III: Deutsche Bank Vs. JPMorgan".

The largest banks (at the time) in the US and in Europe have moved in two different directions since the end of the financial crisis.


Conclusions? Just like James Bond 007 we have seven of those:

1. Apple (AAPL) style conclusion: Strive for excellence and keep an open mind. Better quality makes a difference.

2. Netflix (NFLX) style conclusion: Maintain an open communication channel. Constant (undisputed) streaming is key.

3. Google/Alphabet (GOOG, GOOGL) style conclusion: Keep looking for more knowledge and expand your horizons. The search for data/answers is ongoing.

4. Facebook (FB) style conclusion: Socialize and listen to what others have to say. They may come up with something you haven't thought about.

5. Amazon (AMZN) style conclusion: Find and discover anything you wish for. Being customer-centric is being human-focused.

6. Microsoft (MSFT) style conclusion: Prepare to open new windows. Empower yourself to achieve more.

7. ....and one Wheel of FORTUNE style conclusion: Never Say Never Again!

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The Fortune Teller ("TFT") is a well-known contributor on Seeking Alpha ("SA"), and a top blogger according to TipRanks, with over 30 years of deep and direct market experience.

TFT is the leading moderator of two services on SA: Wheel of Fortune and Macro Trading Factory (led by TFT's "mirage identity" called The Macro Teller, or "TMT")

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On a combined basis, the two principles lived and worked for at least three years in three other-different countries/continents, holding senior-managerial positions across various industries/activities:

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Currently, they run a business which is mainly focusing on active portfolio/fund/asset management as well as providing consulting/advisory services. The business, co-founded in 2011, is also occasionally getting involved in real estate and early-stage (start-up) investments.

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We strongly believe that successful investors must have/perform Discipline, Patience, and Consistency (or "DCP"). We adhere to those rigorously.

The contributor RoseNose is both a contributing and promoting author for Macro Trading Factory. 

On a more personal note...

We're advising and consulting to private individuals, mostly (U)HNWI that we had been serving through many years of working within the private banking, wealth management and asset management arenas. This activity focuses on the long run and it's mostly based on a Buy & Hold strategy.

Risk management is part of our DNA and while we normally take LONG-naked positions, we play defense too, by occasionally hedging our positions, in order to protect the downside.

We cover all asset-classes by mostly focusing on cash cows and high dividend paying "machines" that may generate high (total) returns: Interest-sensitive, income-generating, instruments, e.g. Bonds, REITs, BDCs, Preferred Shares, MLPs, etc. combined with a variety of high-risk, growth and value stocks.

We believe in, and invest for, the long run but we're very minded of the short run too. While it's possible to make a massive-quick "kill", here and there, good things usually come in small packages (and over time); so do returns. Therefore, we (hope but) don't expect our investments to double in value over a short period of time. We do, however, aim at outperforming the S&P 500, on a risk adjusted basis, and to deliver positive returns on an absolute basis, i.e. regardless of markets' returns and directions.

Note: "Aim" doesn't equate guarantee!!! We can't, and never will, promise a positive return!!! Everything that we do is on a "best effort" basis, without any assurance that the actual results would meet our good intentions.

Timing is Everything! While investors can't time the market, we believe that this applies only to the long term. In the short-term (a couple of months) one can and should pick the right moment and the right entry point, based on his subjective-personal preferences, risk aversion and goals. Long-term, strategy/macro, investment decisions can't be timed while short-term, implementation/micro, investment decision, can!

When it comes to investments and trading we believe that the most important virtues are healthy common sense, general wisdom, sufficient research, vast experience, strive for excellence, ongoing willingness to learn, minimum ego, maximum patience, ability to withstand (enormous) pressure/s, strict discipline and a lot of luck!...


Disclosure: I am/we are long TWTR, JPM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Short O as well as $50 (covered) PUTs & $60 (naked) CALLs
Long CBL-D
Short vertical bull call spread on NFLX
Short vertical bull call spread on FB
Long and short a few (both CALL and PUT) options involving SPY

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