"The worse case would be that the street has figured that this space is getting saturated and needs a breather to catch up. That's called sector rotation, as those darling companies go out of favor. That's a version of the story that we're not particularly thrilled to hear as it takes many months to unfold and could put a drag on the entire sector."
This is the list of stocks that I follow (it excludes the newcomer QTS as I believe they went public in October; it will be added next year)
So where are data center stocks today? Let's look at a cumulative chart for year-to-date (YTD) performance of the entire portfolio. The group's return is 3% as of today's close.
Since the peak at the end of January, the group has consistently made lower highs (green bars), which translates to smart money (big institutions) selling into the rallies. The good news is that since August, the group seems to have found a floor as I don't see a recurrence of lower lows (red bars).
Now, how has this group's 3% performance compared to NASDAQ this year? Not too good considering the NASDAQ has appreciated almost 27% YTD. Ouch.
So while everyone was cheering the cloud this year, big money institutions seemed to be comfortably back on earth! Hopefully we'll see some winter sprouts of hope soon!
But if you look at the pure play non cloud space and REITs, it's a different index, and a different story altogether, this index isn't a good indicator, with cloud solutions mixed in with the infrastructure players, which are getting bought if they are smaller, which drags down the buyer stocks. More of a global view.
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