The tech-heavy Nasdaq 100 Index is by far the most crowded corner of the U.S. equities market, according to asset managers surveyed by Bank of America Merrill Lynch, a division of Bank of America Corp. (BAC), as reported by the Financial Times. This comes even as the market value of the index constituent stocks has risen by $1.45 trillion since the end of 2016, per data from Bloomberg cited by the FT. 

Leading the advance are the five largest companies by market capitalization in the Nasdaq 100, tech giants Facebook Inc. (FB), Apple Inc. (AAPL), Inc. (AMZN), Microsoft Corp. (MSFT), and Google parent Alphabet Inc. (GOOGL). These stocks have posted year-to-date price gains through Wednesday ranging from 27% to 53%.

Itching to Invest

Meanwhile, the fund managers surveyed by Merrill Lynch indicate that they are boosting their risk even more as they draw down cash to invest yet more money. Their average cash holdings fell to 4.7% of their portfolio values, the lowest level since early 2015. However, since this figure is above the 10-year average cash balance of 4.5%, Merrill Lynch takes this as an indicator of dry powder waiting to be put to work, per the FT. If so, this would provide another boost to the equity markets.

Other reports indicate that a majority of active managers have underperformed the major indexes so far in 2017, and are desperate to play catch up. Additionally, other analyses confirm the finding of the Merrill Lynch poll that fund managers have above-average cash balances right now. Put these facts together, and they add up to a plausible scenario for yet more buying pressure that propels stocks even higher in the near term. (For more, see also: 5 Forces Fueling the Market's "Risk Rally".)

Big Movers

Through Wednesday's close, the Nasdaq 100 has risen by nearly 26% for the year-to-date. The index had a trailing P/E ratio of 26.19, as of October 13, per a weekly calculation by Birinyi Associates as reported by the Wall Street Journal. For the so-called FAAMG stocks mentioned above, their year-to-date share price moves and trailing P/E ratios are, per Investopedia data: Facebook, up 53% YTD, P/E 40.10; Apple, up 40% YTD, P/E 18.15; Amazon, up 33% YTD, P/E 253.05; Microsoft, up 27% YTD, P/E 28.74; and Alphabet, up 28% YTD, P/E 36.69.

As impressive as these gains are, there nonetheless are other Nasdaq 100 tech companies that have performed even better. The FT cites two chipmakers -- Nvidia Corp. (NVDA), up 86% YTD, and Micron Technology Inc. (MU), up 90% YTD. The companies have widely divergent trailing P/E ratios, at a hefty 55.97 for Nvidia and a cheap 9.64 for Micron.


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