Schwab: Retail traders went big on mega-cap stocks in November
November wasn't a great month for the Magnificent 7 stocks, with nearly all of them suffering steep declines, driven by an investor rotation to more defensive stocks.
Nvidia (NVDA) dropped 10.6%, Tesla (TSLA) shed 8.4%, Amazon (AMZN) slid 7.6% and Microsoft was down 5.4%. Meta (META) ended the month nearly flat, gaining just 0.6%.
The only two of the Magnificent 7 stocks to escape November unscathed were Alphabet (GOOG), which rose 11.4%, and Apple (AAPL), which gained 5.4%.
But according to the latest Schwab Trading Activity Index (STAX), retail investors used the slump in Big Tech stocks to buy the dip.
"Clients were buyers of under-performing Magnificent Seven stocks," Joe Mazzola, head trading and derivatives strategist at Schwab, said in a statement. "Throughout the month, they targeted those with big pullbacks including Nvidia, with a similar pattern in Meta and Amazon."
This was the sixth straight month that Schwab clients were net buyers, "thanks to heavy lifting from a handful of mega-cap stocks," the firm noted.
According to STAX, which tracks the behavior of Schwab’s self-directed clients, the top five stocks that made up the handful of net-buys in November included Nvidia, Palantir (PLTR), Meta, Amazon and Tesla. This was the fifth-straight month that Nvidia topped the list of net-buys.
"Stocks that went sideways or were big winners saw the opposite reaction from clients looking to sell into strength and rotate into under-performing names," Mazzola said.
STAX outpaced the S&P 500 index for the third-straight month, although that's not surprising since the S&P only gained 0.1% in November. According to Schwab, this is the first four-month stretch STAX growth has surpassed S&P 500 growth since a period that ended in March 2021.
This ties for the longest streak in the history of the STAX index.
STAX rose to 48.75 in November, up 1.31% from 48.12 in October, making it the best monthly result since 51.94 in February.
The softest week of trading came during the final week of the month, when the S&P actually rose 4%, showing that Schwab clients were sticking to their buy-the-dip strategy.
With that strategy in mind, it's not surprising that the highest net-sell was Apple, which was one of only two Magnificent 7 stocks that had a strong performance during the month.
"Apple bucked the trend of the other Magnificent Seven as it continued to rally throughout the course of the month," Mazzola said. "Clients sold into strength."
The other four top net-selling stocks were Broadcom (AVGO), Eli Lilly (LLY), Intel (INTC) and Rivian (RIVN).
Generation X investors, or those born between 1965 and 1980, were the most aggressive traders for the second straight month, while Generation Z, born between 1997 and 2012, were the least aggressive, just as they were in October.