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Since 2021, my family portfolio has been heavily concentrated in value stocks, especially cheap FTSE 100 shares. Fortunately, this proved to be a good call because the past 12 months have been great for value shares and terrible for growth stocks (and especially US tech).
Growth stocks had a grim 2022
However, as a veteran investor, I know not to pin all my hopes on one particular investment theme, market, or factor. For example, in late 2021, my wife and I cut our exposure to highly priced US stocks, fearing a bubble that was about to burst. And so it happened, with 2022 being the US stock market’s worst year since the dark days of 2008.
But as last year headed to a close, I spotted that many mega-cap US growth stocks had suffered fairly brutal losses. Take, for example, shares in the UK’s four largest listed companies (in order of size): Apple, Microsoft Corp, Alphabet (formerly Google) and Amazon.com. Here are the 52-week highs and lows of these four tech whales.
Company52-week high52-week lowHigh-to-low fallApple$ 179.61$ 124.17-30.9%Microsoft$ 323.41$ 213.43-34.0%Alphabet$ 151.55$ 83.34-45.0%Amazon.com$ 170.83$ 81.43-52.3%
These declines range from more than three-tenths at consumer-gadgets giant Apple to more than half at online shopping behemoth Amazon.com. Taken together, these share slumps have wiped out trillions of dollars of investor money, with Apple alone losing roughly $1trn of market capitalisation. Wow.
When growth stocks become value shares
As an old-school value investor, I delight in buying into quality companies after their share prices have taken a beating. Hence, in early November — shortly before the US midterm elections — my wife bought shares in all four of these mega-tech growth stocks. Here are their current share prices, plus their one-year performances:
CompanyCurrent price12-month fallApple$ 129.62-24.7%Microsoft$ 224.93-28.4%Alphabet$ 87.34-36.3%Amazon.com$ 86.08-47.0%
Since we bought these four new shares (on or around 3 November), Apple is down 6.7%, Microsoft is up 5%, Alphabet has gained 4.7% and Amazon is down 3.6%. Overall, these growth stocks have yet to produce any real profit for our family portfolio. But time is on our side, right?
Now for the bad news
For the record, I’m expecting a fairly deep and long recession in the UK and Europe this year. However, I also believe that the US will be the world’s best-performing major economy in 2023. And that’s why, just like my hero Warren Buffett, I’m betting on America to bounce back.
Then again, I don’t doubt that there may be more price declines — and possibly even steep falls — in US stocks in 2023. But I also expect that when the US Federal Reserve moves from raising interest rates to lowering them, then the US economic powerhouse will take off once again. And I can’t think of many better ways to ride this recovery than by owning shares in four of the world’s biggest growth Goliaths!