Growth Exists Beyond Big Tech

Growth Exists Beyond Big Tech

over 3 years ago2 mins

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Recent months show that it’s worth looking further than the FAANGs when screening for stocks where both revenues and share prices are rising – although nobody seems to have told billionaire investor Warren Buffett… 😂

What does this mean?

Much of the attention given to stock markets’ rapid recoveries from mad March lows has focused on future-facing tech firms, with the FANMAG group (including Microsoft) singled out for particular praise.

And they’ve certainly swelled. Just five such stocks now account for a quarter of the value of the US stock market and almost half the value of Berkshire Hathaway’s entire share portfolio – despite founder Buffett’s notorious disdain for expensive tech stocks.

But while the FAANGs have played a significant role in dragging the overall US S&P 500 index up nearly 50% in 20 weeks, sectors without a single Big Tech stock have also outperformed the market. Recent analysis from investment research firm Leuthold Group reveals economically sensitive areas including Materials, Energy, and Industrials roaring back 🚂

And although FAANG-heavy growth-focused indexes have delivered market-beating gains, the broader-based Value Line Arithmetic Indexhas done even better – providing investors with a 64% rise despite holding equal stakes in 1,700 companies…

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Why should I care?

All this goes to show that the recent “bull market” hasn’t just been confined to a handful of tech giants – even if their sheer size means they’re looming ever larger in people’s portfolios. And that’s not the only good news for investors looking for growth but worried about putting too many of their eggs in the Big Tech basket 🍳

While 60% of the S&P 500’s top revenue growth prospects come from just three sectors – Information Technology, Health Care, and Consumer Discretionary – Leuthold points out that, since 2016 (when investors started majorly favoring “growth” over “value” investing), simply buying the top 20% of stocks for expected sales growth across each sector (or all sectors) has delivered investors superior returns while also downplaying diversification and valuation risks.

Source: The Leuthold Group
Source: The Leuthold Group

Interested in learning more about stock-screening strategies like growth and value? Search the app for our Pack on Investment Styles.



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