Summary

Big Tech companies, including Apple, Microsoft, Amazon, Alphabet (Google), and Facebook, have continued to be strong investments in 2021, outperforming the S&P 500 with significant gains since the pre-pandemic peak, and are poised for a pivotal week as they report quarterly earnings.

Abstract

The article discusses the robust performance of Big Tech stocks in 2021, with all five major companies—Apple, Microsoft, Amazon, Alphabet, and Facebook—showing double-digit gains over the past year, surpassing the S&P 500's 19% increase. Despite a slight dip on July 19, the market has seen consistent highs, with Big Tech leading the recovery since the Spring of 2020. Google, in particular, stands out as the best performer, while Amazon has shown the least growth among the group. The article also compares the performance of Big Tech to the broader market since the pre-pandemic peak in February 2020, noting that these companies have seen gains over 50%, compared to the S&P 500's 27% increase. The upcoming week is crucial as all five companies are set to report their quarterly earnings, which could provide insights into their performance and the broader economic environment.

Opinions

The author suggests that Big Tech stocks have been a great investment over the past year, with all companies returning more than 20%.
Google is highlighted as potentially the best-performing tech stock of 2021, with its success attributed to its cloud services.
The article implies that dollar-cost averaging is a powerful investment strategy, especially in volatile markets, as it removes the need to time the market accurately.
The Federal Reserve and legislative policy are credited with having a significant impact on the stock market's performance during the period in question.
The author posits that while Big Tech has outperformed small and mid-cap stocks since the pandemic's onset, all market segments have recovered well, with

Big Tech Is Still a Great Investment in 2021

Can these companies continue their run as they report earnings this week?

The market has been ripping in 2021. The S&P 500 is up 19% since the beginning of the year. And with the exception of it being down 2% on Monday (07/19) it has constantly been hitting new highs.

While the market recovery back in Spring 2020 was led by big tech, there hasn’t been as much coverage of these companies since.

Unsurprisingly though, big tech stocks have still been doing extremely well. They are up double digits for the past year, with most of them up more than the S&P 500 is.

For reference, I am referring to ‘big tech’ as Apple, Microsoft, Amazon, Alphabet (Google), and Facebook — the five largest market cap companies.

1-year gains

In the past year, from July 23rd 2020 to July 23rd 2021, all five companies returned more than 20%. The S&P also returned more than 20% though, seeing gains of 33%. The best performing of the bunch has been Google, while the worst has been Amazon.

Why Google Can Be the Best Performing Tech Stock of 2021

Hint: It has to do with the cloud

medium.com

Below is the annual gain for all five and the $SPY.

If you’re more of a visual learner, here's the chart.

Image from Yahoo Finance | Prices from 07/23/20–07/23/21

It’s clear that investing in any of these companies a year ago would have provided great returns. Even the overall market is up a lot, more than it usually returns in one year.

But big tech was the talk of the town leading the initial recovery, so it's also worth looking at their returns using pre-pandemic prices.

Gains since pre-pandemic peak

Looking at most charts, the majority of stocks hit a pre-pandemic peak on February 14, 2020.

And then we saw the market crash 30% in two months.

Since the pre-pandemic peak, all of the big tech stocks have done great, with gains of over 50%. The S&P over this time period has only gained 27%, less than its one-year gain to date. This is because the S&P took a longer time recovering to its pre-pandemic price — compared to big tech, whose prices rebounded quickly in the months following the crash.

Below is the gain for big tech and the $SPY, from February 14, 2020 to July 23, 2021.

It’s worth pointing out that Amazon’s gain does not lag the group here. From 2/14/20 to 7/23/20, they led the way with a stock gain of 40%.

Again, here’s the chart. Note: I chose a start date of February 1, 2020 instead of February 14, 2020.

Image from Yahoo Finance | Prices from 02/01/20–07/23/21

The great gains from stocks during this period help showcase the power of dollar-cost averaging over time, as trying to guess the high and low prices is extremely difficult. It also shows the impact the Federal Reserve and legislative policy have had on the market.

Comparison to small and mid-cap

While big tech consists of the five largest companies by market cap in the United States, I thought it would be worth looking into the gains of mid-cap and small-cap stocks as well.

For this, I used the iShares Russell 2000 ETF (IWM) as small-cap stocks and the iShares Russell Mid-Cap ETF (IWR) as mid-cap stocks.

Similar to the S&P, these ETFs struggled for the months right after the crash. Both have great gains from July 2020 to July 2021, better than from February 2020 to July 2021.

Below are the gains from February 14, 2020 to July 23, 2021.

And below are the gains from July 23, 2020 to July 23, 2021

The difference between the two gains indicates that all three ETFs were negative for the period of February 14, 2020 to July 23, 2020.

Not exactly what you want to see as an investor, but the fact that all three are now up 30% since their pre-pandemic peak more than makes up for that period.

What’s in store for big tech this week

Why is this week important for all of big tech? All five report quarterly earnings.

Apple, Alphabet, and Microsoft report Tuesday. Facebook on Wednesday and Amazon on Thursday.

For companies as big as these five, bad earnings likely wouldn’t tank their stock. But the guidance they issue and their gauge of the economic environment is worth noting. As the biggest companies, they have a lot of influence.

Oh, and Tesla reports on Monday too. This week has over 160 S&P 500 companies reporting.

All investments come with risk. The above references an opinion and is for information purposes only.