Over the past 35 years and more, my investing strategy has evolved considerably. Today, I consider myself a veteran value investor, seeking out undervalued shares and hunting down high cash dividends. But this is not the sole approach my wife and I take with our family’s capital. After all, from 2009 to 2021, growth stocks easily beat value shares by considerable margins.
Value shares and growth stocks
From mid-2022 onwards, my wife and I built a new family portfolio to generate future dividends and capital gains. Initially, we bought a selection of undervalued FTSE 100 and FTSE 250 shares for their income-generating properties.
But a portfolio based solely on value/dividends/income can underperform the wider market over long periods. This is especially the case during periods of excessive exuberance, as happened in 2020-21.
Hence, my wife and I decided to buy some mega-cap US growth stocks to balance out our new portfolio. And this led us to invest in four ‘American Goliaths’ — all among the largest corporations on earth.
Four US tech giants
On 13 October last year, the US S&P 500 index and the tech-heavy Nasdaq Composite index both hit their 2022 lows. And while these indices were bouncing back, my wife bought four US growth stocks for our family portfolio in early November.
These tech Titans were Alphabet, Amazon.com, Apple, and Microsoft Corp. Not by coincidence, these companies are the four largest US-listed firms. For me, buying into these businesses was like placing a big bet on a US corporate comeback in 2024.
When America’s current financial worries (high inflation, rising interest rates and slowing growth) ease off, I expect these four companies to lead the next recovery charge.
Performance so far
For the record, our gains on these stocks so far have been minimal. Here’s how each has performed to date:
|
Alphabet
|
+1.7%
|
|
Amazon.com
|
-3.2%
|
|
Apple
|
+0.9%
|
|
Microsoft Corp
|
+9.2%
|
The stand-out winner so far has been Microsoft, whose shares are up nearly a tenth in four months, Meanwhile, Apple and Alphabet (Google’s parent) have eked out modest gains. And online-retail colossus Amazon has delivered a small paper loss to date.
The overall gain across all four growth stocks is 2.1%. This is a fairly tame return, given the volatility of US tech shares. I’ve aimed for a stake in these tech leaders for a long time, but avoided buying these overinflated stocks during the ‘everything bubble’ of 2020-21.
This is a long-term play
All four stocks are down considerably from their 2021 highs. Here’s how each has performed over the past 12 months:
|
Company
|
12-month change
|
Market value
|
|
Alphabet
|
-29.0%
|
$1.2trn
|
|
Amazon.com
|
-34.8%
|
$972bn
|
|
Apple
|
-7.4%
|
$2.4trn
|
|
Microsoft Corp
|
-11.9%
|
$1.9trn
|
After these four tech mega-caps fell steeply, it almost felt like we were buying value shares, instead of growth stocks. To me, I was buying into these companies at a discount — despite their relatively high valuations and minimal or non-existent dividends.
Based on my usual value criteria, these stocks still look rather expensive. But experience has taught me that US tech shares have a long history of producing market-beating earnings growth. So my wife and I plan to hang on to these four mega-cap innovators for many years to come!
The post I bought these 4 US growth stocks for a tech recovery appeared first on The Motley Fool UK.
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Cliff D’Arcy has an economic interest in Alphabet, Amazon.com, Apple, and Microsoft shares. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet, Amazon.com, Apple, and Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
