Momentum is driving all memory stocks, says S3 Partners' Bob Sloan
Summary
Bob Sloan of S3 Partners joins Power Lunch to discuss positioning in the memory trade. He notes the DRAM ETF’s record growth and massive passive inflows, while active managers have built historically high short positions. He argues memory stocks are a pure momentum trade driven by index flows, and a pullback is likely if those flows slow. Investors should watch indexing activity as a forward signal.
- DRAM ETF reached $10B AUM and $1B in short interest faster than any ETF in 22 years.
- Passive index flows, not valuation, are driving memory stocks to five-year highs.
- Hedge funds and mutual funds are underweight and shorting Micron and Qualcomm at record levels.
- Active managers are effectively betting against the passive inflow trend.
- Sloan advises monitoring index flows as the trigger for a market pullback in memory names.
- He draws a parallel to Tesla’s history, where shorts suffered against momentum until fundamentals shifted.
Ideas
Watch memory stocks; index flows driving them.
Memory stocks (DRAM ETF, Micron, Qualcomm) are being driven entirely by mechanical index flows, not valuation, pushing them to five-year highs. Hedge funds and active managers are heavily underweight and have record short positions. If the index flow stops, the market will go down, so investors should monitor index flows as a key signal for a potential pullback.
