Most-tipped global stocks: Gainers vs losers, 5 up and 5 down

International and ACCC controversies be damned! Google still led Livewire’s reader global picks by a large margin in the first quarter of 2021. 

What am I talking about? Well, at the beginning of the year, we asked you to nominate your picks for top-performing small caps and large caps. And today, we're looking at how the most-tipped global stocks performed - with Google handily atop the pile so far -  to see how your thoughts align with those of our fund manager contributors – as I’ve attempted to lay out for you below.

A bumper year so far for Alphabet, but the same can't be said for some of its FAANG counterparts, notably Apple which languishes second-last in 2021 so far

The following wire runs the ruler over the global stocks you nominated at the end of last year as those you’re most bullish on for 2021. The average returns bled ever-so-slightly into the negative, the -0.14% return underperforming the benchmark MSCI World's 5.16% over the quarter. 

But it wasn’t one-way traffic, with some emphatically positive figures featuring alongside the laggards, which saw the 10 global stocks evenly split between negative and positive returns.

It's been a volatile period, with the index and the reader picks (as a group) swapping the lead a few times, but the MSCI won out at the quarter-end, unfortunately

Disclaimer: This article is for informational and educational purposes only, it is not a recommendation to buy or sell any of the securities mentioned. The data on the stocks below was sourced from Sharesight.

#1  top-tipped global stock – Amazon (NASDAQ: AMZN)

• Percentage of votes in the top 10: 46%
• Market Cap: US$1.55 trillion
• YTD return: -5.07%

Jeff Bezos’s online retail juggernaut has a steep hill to climb if it hopes in 2021 to draw anywhere near last year’s performance figures. Amazon returns dived into the red for the first quarter, delivering a -5% return, or just under -4% when allowing for Australian- versus US-dollar conversion. In a volatile period for global markets, Amazon’s shares dipped as much as 8% during the quarter, caught up in the growth stock sell-off that knocked tech firms particularly hard. It recovered slightly but remained about 5% down in peak-to-trough terms between 1 January and 31 March 2021.

Amazon’s biggest news item in Q1 was probably Bezos’ announcement he would step down as CEO, after 25 years at the helm of the company he founded. But the broadly-held view is this won’t have an impact on the company’s profitability, because a safe pair of hands was found in long-time Amazon senior executive Andy Jassy, one of the creators of the firm's hugely successful AWS cloud computing business. The company is in an “invention” phase as Bezos’ terms it, recently announcing its plan to tackle the US$4 billion US healthcare sector, with initiatives rolling out in the telehealth and pharmaceuticals segments.

"Amazon was definitely a winner during covid, but there was this assumption it won’t be a winner as we come out of the pandemic," says Munro Global Growth Fund's founding partner and CIO, Nick Griffin. The fund holds its single biggest position in Amazon, with a portfolio weight of 5.4% as of February 2021.

"The investment case for Amazon is still strong, but I think as the recovery has broadened, people have found other investments in which to put their money for a while," Griffin says. 

He is confident Amazon’s growth in its cloud and e-commerce businesses will continue, but the key for investors will be the US’s obsession with "comparatives". He says this quarter - the second-quarter 2021 for the NASDAQ-listed firm- will be closely watched for management's guidance for the period from March to June 2021.

The market is “a little concerned” because other businesses like physical retailers have accelerated into the recovery, while many e-commerce stocks have pulled back since the mid-pandemic period. But Griffin and his team aren’t worried, and Amazon remains the fund’s largest holding.

#2 most-tipped global stock: Tesla (NASDAQ: TSLA)

• Percentage of votes in the top 10: 9.6%
• Market Cap: US$641 billion
• YTD return: -5.42%

Tesla ranked second in our reader picks for 2021, but fell some way behind Amazon’s Livewire readers’ enthusiasm. The company’s return over the quarter was only slightly worse than Amazon’s, having also been smashed in the rotation away from growth firms that kicked off in Q4 and accelerated again between 1 January and 31 March. From an all-time high of US$880 a share on 8 January, Tesla stock bombed more than 20% to around $690 at the close on Thursday 9 April (US-time).

A company that has long polarised investors, this tanking of Tesla will have been of little surprise to Pengana Capital's Joy Yacoub, who in late January spelt out why the fund manager won’t own the company. 

A slightly more upbeat outlook came from Antipodes Partners’ Alison Savas, who last month lauded the first-mover advantage underpinning Tesla’s meteoric rise and tipped more than 1 million EV sales from Musk’s company next year. But Savas tempered this by tipping Volkswagen to sell a similar number of EVs in 2022 and Tesla’s lead over this and some other traditional automakers tackling the segment to fall away. 

#3 most-tipped global stock: Apple (NASDAQ: AAPL)

• Percentage of votes in the top 10: 14.6%
• Market Cap: US$2.05 trillion
• YTD return: -7.9%

While the world’s best-known consumer electronics brand sat on the podium as a top-three reader’s global stock pick, it just sneaks inside the top-10 in the performance stakes for the first quarter of calendar 2021. 

Apple shares have see-sawed so far this year, rising about 10% between 1 and 22 January, dropping 18% in mid-March before recovering slightly in the second half of last month. The stock returned a negative-7.9% over the full quarter.

There’s a view that the best days of Apple – and indeed others within the FAANG cohort (Facebook, Amazon, Netflix, Google) – are behind it. Perpetual Investments Thomas Rice said as much when we spoke to him in the back-end of 2020. With a market cap of US$2.19 trillion now – and the widely acknowledged drop off in sales of its hero product the iPhone, maybe Apple hasn’t got a heap of headroom for further growth. 

A recent Morningstar US report on the company used terms such as “moderating growth” and “deceleration” to describe the company’s core iPhone, Mac and iPad product lines. And though the research house upped its “fair value” for the stock at the end of January, it viewed Apple shares as overpriced at that point, when they were trading only slightly above current levels.

#4 most-tipped global stock: Alibaba (NYSE: BABA)

• Percentage of votes in the top 10: -2.61%
• Market Cap: US$615 billion
• YTD return: -2.61%

The Jack Ma-founded Chinese tech conglomerate has been under a cloud since the outspoken (now former) chairman ticked off the China Communist Party a couple of times in recent years. The consequences of these actions have been widely reported, Ma having lost his leadership of the company in 2019 and then seen the group’s record-breaking Ant Financial IPO cancelled at the eleventh hour. And yet, while it’s delivered a negative return in the first quarter of 2020, Alibaba remains a “special” company in the eyes of T. Rowe Price’s portfolio specialist Sam Ruiz. He highlights the company’s continuing growth of between 30% and 40% a year and the potential for still further expansion ahead, despite the regulatory risks, and believes it’s good value at its current price.

Magellan Financial Group's Vihari Ross also ranked Alibaba as a buying opportunity on the basis of its vital position in several parts of Chinese consumers’ lives. Montaka’s Chris Demasi echoed this view, flagging Alibaba’s giant online marketplaces that continue to grow by between 20% and 30% a year.

#5 most-tipped global stock: Microsoft (NYSE: MSF)

• Percentage of votes in the top 10: 5.4%
• Market Cap: $1.87 trillion
• YTD return: 6.34%

The third-best performance among Livewire readers’ global picks came from software juggernaut Microsoft. Having weathered various uplifts and downturns since it launched in the mid-1970s, the company which is just a few short years shy of its half-century once again boomed during the pandemic. Its cloud-based Office365 software platform, which in more recent years has also included the Microsoft Teams enterprise messaging system, saw the firm post record returns in recent quarters.

In a podcast interview with our own Patrick Poke last month, Claremont Global’s Bob Desmond discussed Microsoft as a must-have “elder stock” for any concentrated portfolio. Singling out Microsoft’s “fortress balance sheet” and top-three scale alongside the likes of Amazon and Google, he highlighted its top-line growth of around 10% a year.

#6 most-tipped global stock: Alphabet (NASDAQ:GOOGL)

• Percentage of votes in the top 10: 3.5%
• Market Cap: US$1.52 trillion
• YTD return: 17.9%

Google’s return in the quarter ended-31 March was more than double that of its nearest performance rival of the period, global mining powerhouse (and Aussie success story) BHP Limited. The latter’s inclusion in this list may confound some of you, but this will be explained a little later.

But back to Google: the search giant returned a very tidy 17.9% - or 19.4% if you take into account the shifting Aussie-dollar versus US-dollar conversion. It’s shot to the top of the pops from a middling sixth-position at the start of the year when we first looked at your global picks for 2021.

This performance belies the controversy Google courted locally just a couple of months back when the company again grabbed headlines for all the wrong reasons. But unlike Facebook, which for a while entirely pulled all Australian news sites from users’ feeds in its protest against the Australian Competition and Consumer Commission’s turbocharged media bargaining code, Google negotiated quite quickly.

As the stellar returns suggest, Australia doesn’t really move the dial for Google, comprising only around 1% of its total serving of search results and adding about $10 million a year: chicken feed for a company with a market cap north of US$1.5 trillion. Both fundies alluded to earlier - Magellan's Vihari Ross and Montaka's Chris Demasi - remain bullish on the stock, even considering the other persistent fly in Google’s ointment: the antitrust cases lumbering along in the US and Europe. But they highlight regulation is certainly an area that tech investors need to keep a close watch on.

#7 most-tipped global stock: Square Inc (NYSE: SQ)

• Percentage of votes in the top 10: 1.6%
• Market Cap: US$103 billion
• YTD return: 4.38%

Lucky number seven in terms of reader picks, New York Securities Exchange-listed payments company Square made it into the top five for the quarter, posting the group’s fourth-highest return of 4.38% over the period. High-profile innovation investor Catherine Wood, portfolio manager of Nikko AM's ARK Invest, is an outspoken backer of the company. She recently told US’s CNBC that Square Inc was “on the right side of change” in backing bitcoin – alongside Tesla. Square is the third-largest holding in Wood’s flagship ARK Innovation ETF.

A classic growth stock, the company has returned around 200% over the last 12 months. This is also backed by fundamentals, with revenue and profit margins also continuing to climb. Square’s Cash application has been one of the biggest contributors more recently, management attributing about 68% of its growth in the third quarter of 2020.

#8 most-tipped global stock: BHP (NYSE: BHP)

• Percentage of votes in the top 10: 0.7%
• Market Cap: US$175 billion
• YTD return: 9.36%

Continuing the “dream run” for cyclical stocks, BHP’s quarterly return nudged past 10% in the first quarter of 2021 if you factor in currency shifts, which has a big impact given iron ore is priced in US dollars. The “Big Australian” – whose dual-listing means it's both an ASX darling AND a solid performer on the New York Securities Exchange – was the top performer in our reader picks – Australian large-caps for the quarter, as discussed by my colleague Patrick Poke. BHP fared only marginally worse in the global category, finishing second in the performance stakes, ahead of software superstar Microsoft.

Beating already-lofty analyst expectations during the interim earnings season in February, BHP delivered both stellar capital growth and dividends in Q1 2021. Key reasons are the pandemic recovery-led demand for iron ore and an overhang of supply shortages from the earlier problems of the world’s leading producer Vale. China’s advanced position on the “COVID curve” also played a part, as does its overall industrialisation push, which continues to confound the naysayers.

And copper production is another part of BHP’s bull run, as alluded to late last month by Regal Fund Management’s CIO Philip King.

#9 most-tipped global stock: Disney (NYSE: DIS)

• Percentage of votes in the top 10: 0.7%
• Market Cap: US$335 billion
• YTD return: 1.87%

Tied with the mining major in reader votes, the brand behind the so-called “happiest place on earth”, Disney, delivered a middling return (within our top 10 reader picks, at least) of 1.87% in the first quarter. The entertainment company has been leaning ever more heavily on its Disney+ streaming business since COVID obliterated revenue from its theme parks. Parks were still down 53% in October to December 2020 quarter, but Disney+ helped offset the losses.

Streaming video on demand has long been a hot topic and was itself given a big shot in the arm once pandemic lockdowns rolled out. Magellan’s Hamish Douglass regularly discusses streaming in his shareholder presentations, though mainly in the context of Netflix rather than Disney. 

But this highlights the power of the segment, which has transformed the way we watch television. And given the lingering effect on the theatre movie release schedules – Disney’s also a major player in this category through the likes of its Lucasfilm and Pixar Animation Studios franchises – everyone will have their eyes glued to the screen for the next instalment as the vaccine-led recovery takes shape.

#10 most-tipped global stock: NIO (NYSE: NIO)

• Percentage of votes in the top 10: 1.2%
• Market Cap: US$63.8 billion
• YTD return: -20.3%

And last but not…well yes, it’s least too, in terms of our top 10 performers, is China’s answer to Tesla, the electric vehicle maker NIO. It’s regularly called out as part of the future of the automotive sector, but even in its home market, it loses out to other EV-makers with strong US ties: the earlier-mentioned Elon Musk company and a joint venture between GM and two Chinese state-owned companies, who hold positions one and two in sales. NIO only has one factory and is yet to make a profit, even though its market cap outstrips both GM’s and Ford’s.

Why the red ink? Interest rate changes – rising rates are terrible for EVs, who typically need lots of financing to fund cash flows – and microchip shortages are cited as some of the challenges to hit Chinese EVs more recently, says Barron’s. The financial newspaper reports that it’s not as simple as blaming the share price declines of the segment on the broader Growth, tech stock sell-off. It may be due partly to Chinese EV competitor Li Auto’s tapping of capital markets, having recently announced a US$1.5 billion raise including a convertible bond. In response, shares in NIO, Li and another competitor XPeng have dropped more than 20% in 2021 so far.

In conclusion

It’s been fascinating trawling through the data you’ve so helpfully given us about what you expect from global stocks this year. Especially given the greater emphasis we’ve all placed on global news since last March, as the pandemic spread like wildfire and we were glued to the news flow of infection updates, the addition of global stocks to reader picks this year has been really useful – that’s what I reckon, anyway.

And as the recovery lumbers along, we’re still watching global news, but much more hopefully in checking the progress of vaccines and national rollouts. Looking at global stocks is just another element of this, as shown in the above return figures for mining stocks versus the tech firms – the recovery winners versus the mid-COVID maestros.  I can’t wait to roll out these updates in the quarters ahead, before ultimately reflecting on the full year 2021. And then again in 2022, when we’ll for the first time be able to compare quarter-on-quarter picks and performance. But I'm getting ahead of myself. Thanks for opening up your wish list of global stocks, and stay tuned for the next of these updates at the end of June.

Don't forget to follow my colleagues Patrick Poke for an update on your Aussie large-cap picks, Ally Selby for your global stocks, and Mia Kwok for a final wrap of the fundies' favourites (Thursday).

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