Big tech powered US stocks to a third straight winning year last year, as giants such as Apple Inc and Microsoft Corp continue to see strong demand almost regardless of the economic environment.
Five of the market’s most notable Internet and technology names — Apple, Microsoft, Google parent Alphabet Inc, Amazon.com Inc and Facebook Inc parent Meta Platforms Inc — rose this year, even as they finished in the red on the final trading day of last year.
While their performances last year varied from Alphabet’s 65 percent surge to Amazon’s 2.4 percent slog, the group collectively added more than US$2.45 trillion in market valuation. Microsoft, Apple and Alphabet were among the three biggest contributors to the S&P 500 Index’s gains for the year.
“Investors have recognized that these companies continue to do extremely well,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott, which has about US$125 billion in assets under management.
The rapid growth of their profits, their competitive moats and the strong balance sheets have protected them from some of this year’s risks, he added.
“While I believe in the merits of tilting toward cyclical names going into 2022, I would not abandon tech,” Luschini said.
The group ended last year on a negative note. Apple fell 0.4 percent on Friday, while Microsoft lost 0.9 percent, Amazon dropped 1.1 percent, Alphabet shed 0.9 percent and Meta sank 2.3 percent.
The NASDAQ 100 Index declined 0.7 percent for the session, but still rallied nearly 27 percent for the year.
Here is how the group performed last year, starting with its biggest gainer:
Alphabet
Google’s parent company soared 65 percent, making it the top performer among Wall Street’s biggest names. It was the strongest year for the stock since 2009, and it briefly joined Apple and Microsoft with a US$2 trillion market valuation.
Alphabet benefited from growth in its cloud business, as well as a rebound in digital ad spending, particularly in key categories such as travel that were hurt by the pandemic in 2020.
Earlier this week, CFRA Research upgraded the stock to a strong buy based on its “attractive valuation versus large-cap tech peers,” as well as a “belief that it can sustain a mid-teen annual revenue growth pace over the next three years.”
Microsoft
The software giant surged 51 percent, pushing it into the US$2 trillion market capitalization club.
The stock has risen for 10 consecutive years, its longest such rally ever, and it has put up double-digit returns for nine straight years. The shares have risen nearly 1,200 percent since the end of 2011.
Microsoft’s strength came from steady demand for its cloud computing and enterprise software.
Apple
The iPhone maker rose 34 percent, beating the S&P 500 for a third straight year. While last year marked its weakest performance in three years — the stock rose more than 80 percent in 2019 and 2020 — the rally brought the company within striking distance of a historic US$3 trillion market capitalization.
Despite issues such as a shortage of chips and the COVID-19 pandemic, which recently prompted Apple to shut its New York City retail stores, the stock remained a favorite with investors last year.
The company continues to benefit from the global popularity of its products, the potential for new offerings to maintain steady sales growth and a strong cash balance.
The future looks bright with investors favoring equities that are considered high quality with long records of growth amid the uncertainty related to US Federal Reserve policy and the prospect of higher rates.
Meta Platforms
Shares rose 23 percent, roughly in line with the S&P 500, despite it being one of the most tumultuous years in the company’s history.
While Facebook’s parent continued to benefit from high user engagement across its platforms and an ongoing shift of advertising budgets toward social media, it struggled with the effect of Apple’s changed privacy policy and intense scrutiny of its products, especially after the release of documents from a whistle-blower.
In October, the company announced a new focus on the metaverse, an immersive virtual reality technology, and a new name to reflect the shift.
Meta’s gains came mainly in the first half of last year, as the stock has not traded at a record since September.
However, Wall Street is optimistic about the company’s prospects this year, given what is seen as an attractive valuation and a powerful engine for generating profits.
Baird just named it one of its top large-cap Internet picks for next year.
Amazon.com
The e-commerce company was a notable underperformer relative to its megacap peers and the market as a whole.
The stock gained 2.4 percent, enough for a seventh straight positive year, its longest winning streak ever. Since the end of 2014, the shares have soared nearly 1,000 percent.
Amazon traded within a fairly narrow range throughout the second half of the year, as a pair of disappointing quarterly reports, rising labor costs and supply chain disruptions weighed on shares.
On Wednesday, Mizuho Securities managing director Jordan Klein wrote that among investors there is a “clear view that the sell-side seems to be mis-modeling 1H22 (as in much too high.)”
Still, a number of firms have named Amazon their top pick for this year.
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