Many investors automatically assume that you need to take relatively high risks to beat the markets. There are smaller companies which do surprise on the upside and can create stellar returns but these are few and far between. The reality is that you do not need to take excessive risks when looking to “beat the market” as seen by the performance of the likes of Apple and Amazon since the turn of the year. These are huge companies and not necessarily seen as investments which would deliver well above-average returns.
Amazon
The Amazon share price started 2017 around the $750 level, recently touched $1,000 a share and is now standing at $996.47. This is a company which was for many years ridiculed by researchers, no profit, continuous investment in research and development and trying to crack a market which many believed wasn’t even there. However, if we fast forward a decade Amazon is now the leading light in the online retail market, looking to crack the fresh food market and finally concluded a deal with Nike to sell their products online. The shares are up around $250 since the turn of the year which equates to a return of 33%.
Apple
In many ways Apple is a law unto itself because the company keeps rolling out new products which are both innovative and extremely consumer friendly. Time and time again the company has ramped up expectations with some analysts concerned they would not be unable to deliver. However, time and time again the company has delivered, the share price has risen although in the short to medium term investors will need to see some activity on the acquisition front. The share price began 2017 at around $118, peaked at $156 and now stands at $145.06. While the return is a little less than Amazon it still stands at 23% since the turn of the year. With new products to be launched in the final six months of 2017 who knows where the share price will go!
Index performance
During this period the Dow Jones Industrial Average index increased from 19,762 up to 21,408 which is a return of just over 8%. The NASDAQ has increased from 5,383 up to 6,176 which is an increase of 14.7%. So, while everybody seems to talk of up-and-coming technology shares and smaller companies as offering the best possibility of stellar returns, and a high degree of risk, maybe that is not the case?
Conclusion
We have taken Amazon and Apple as two prime examples of large companies which have performed admirably since the turn of the year. Both companies have significantly outperformed the NASDAQ and the Dow Jones Industrial Average indices and there are still reasons to be optimistic about the short, medium and long-term performance of these companies. There are obviously hidden gems in the world of stock market investment but sometimes there are shares in front of your eyes which should be considered as having the potential to deliver above-average returns.
We’re not saying the likes of Apple and Amazon will always outperform the indices but during 2017 so far they have not done too badly?