5 Stocks That Keep Beating the S&P 500

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Over the past year, a sizable group of stocks in the S&P 500 has been getting hammered with many trading at historically low valuations. However, in this video clip from “Ask Us Anything” on Motley Fool Live, recorded on April 22, Fool.com contributors Jon Quast and Jason Hall examine why the five biggest stocks are bucking this trend and beating the market.

Jon Quast: Yeah. We’re getting hammered out there. Most of the stocks out there are getting hammered. What is not getting hammered, and I find this pretty interesting, look at the biggest stocks. This is S&P 500 stocks. But Apple (AAPL -3.66%), Microsoft (MSFT -4.18%), Alphabet (GOOG -3.72%) (GOOGL -3.72%), Amazon (AMZN -14.05%), Tesla (TSLA -0.77%), most of these over the past year are actually beating the market, and it seems like there’s just been this flight to so-called safety.

Jason Hall: Yeah. We look at these companies, and their massive platforms and they’re stable, and they have huge competitive advantages, and we feel like we can depend on them. We don’t need to get into any conversations about Tesla. But that’s what people see these as big, innovative, safe, profitable companies.

Jon Quast: Exactly. Look at their valuations over the past five years. With the exception of Amazon and Alphabet trading in line with historical valuations, Apple, Microsoft, and Tesla getting to higher valuations. That’s something that I find rather interesting. We’ve seen basically 80% of the market get cheaper [laughs] right now. They are trading below their 200-day moving averages and a lot of these are actually trading at historical low valuations. I think of PayPal (PYPL -4.52%), I think of Roku (ROKU 1.39%), for example.

These are stocks that are trading down in territories that they don’t frequently trade in. MercadoLibre (MELI -6.38%) is another one that comes to mind. But you have these big tech stocks that are trading at higher valuations, they’re beating the market. I wonder if there’s just a flight-to-safety and it reminds me of the 1960s. There’s a book called Buffett, The Making of an American Capitalist by Roger Lowenstein.

Jason Hall: Let me tease you Fools. We’re going to be getting an interview with Roger and we’re going to be running it next Friday.

Jon Quast: That’s awesome.

Jason Hall: Yeah.

Jon Quast: It’s talking about the Nifty Fifty in the 1960s, all of these stocks were trading at very, very high valuations like IBM (IBM -2.60%), Xerox (XRX -0.74%).

Jason Hall: This was high-tech growth in that period.

Jon Quast: Exactly. Wall Street was recommending the popular stocks regardless of price and it was at the end of this time when these stocks are reaching their pinnacle that Buffett actually got out of the market entirely. Dissolved the Buffett partnership, gave back all their money, and said, “I am not in tune with this market.”

I just wonder if there’s some parallels right now. We feel like we’re getting hammered and we are, but there are these handful of stocks that aren’t getting hammered, and it seems like this is the flight-to-safety. This is where your popular stocks are getting recommended regardless of their price or their value.

There are some really good value plays out there and some really good deals, and they just keep dropping dropping dropping. I think that that is just a weird quirk of the market emotional makeup right now, and I don’t think that’s going to last forever.