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The Stocks That Eclipsed the FAANGs

Third Quarter 2020 

The US tech giants tend to grab most of the market's attention. But investors may be overlooking better-performing overseas stocks.

Insight from our sub-adviser, Schroders Investment Management
Duncan Lamont, CFA
Head of Research and Analytics


All of the most exciting developed-market companies to invest in are located in the US, right? Think again. Yes, the US stock market has dominated the global landscape for years, but there’s a catch. In terms of performance, US stocks have returned 73% in the five-year period ended 7/31/20 (USD), leaving all but the small New Zealand market (which only includes seven stocks) in its wake (see FIGURE 1).

 

Figure 1

The US Stock Market Has Powered Ahead of the Competition

Returns over the five-year period ended 7/31/20 (USD) 

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Past performance does not guarantee future results. | Chart shows all constituent countries in the MSCI World Index1 of developed-market stocks. | The level of each market’s return would be different when expressed in a different base currency, but the ranking and relative performance would be the same. Source: Refinitiv.

 

Most of the Top-Performing Companies Are From Outside of the US

Companies such as the FAANGs—Facebook, Apple, Amazon, Netflix, and Google (Alphabet)—dominate headlines.

But, investors may be surprised to learn that, over the past five years, seven of the top-10-performing developed-market stocks in the MSCI World Index and 16 of the top 25, in dollar terms, have been located outside of the US. Countries of origin include Canada, Japan, New Zealand, Sweden, Australia, Germany, and Denmark. Stocks in the Index span sectors as diverse as milk production, mining, and, of course, technology (see FIGURE 2).

 

Figure 2

The Top 25 Best-Performing Stocks in Developed Markets

Excluding the FAANGs, 16 out of 25 companies are located outside of the US

Country Company Business Five-Year Return (USD)
US Advanced Micro Devices Semiconductors 3,912%
Canada Kirkland Lake Gold Gold mining 3,183%
Japan Lasertec Semiconductor testing 2,916%
Canada Shopify Online marketplace 2,622%
New Zealand The A2 Milk Company Protein-free milk 2,449%
Sweden Evolution Gaming Digital casinos 2,370%
Canada Cronos Group Cannabis producer 2,174%
US Nvidia Graphics processing units (GPUs) 2,091%
US Ringcentral Cloud-based communications 1,373%
Canada Canopy Growth Cannabis producer
1,088%
Australia Fortescue Metals Gp. Iron and steel 1,087%
US Wix.com Software 937%
US Veeva Systems Cloud computing 883%
US Paycom Software Online payroll and HR 789%
US Mercadolibre Online marketplaces 768%
Australia Northern Star Gold mining 695%
US Teladoc Health Virtual healthcare 653%
Germany Sartorius Pref. (Xet) Medical equipment 626%
US Wayfair E-commerce (furniture/homeware) 613%
Japan Advantest Semiconductor testing 586%
Japan Daifuku Materials handling systems 568%
Japan Gmo Payment Gtwy. Payment processing services 550%
Denmark Ambu B Medical equipment 548%
Australia Evolution Mining Gold mining 543%
Canada B2gold Gold mining 540%
MSCI World     48%
The FAANGs      
US Facebook   170%
US Apple   280%
US Amazon   490%
US Netflix   328%
US Google (Alphabet)   126%

Past performance does not guarantee future results.

Data as of 7/31/20. Source: Refinitiv.

 

Particularly noteworthy is that, despite the fact that Japanese stocks in aggregate have underperformed their US counterparts by 55% over the past five years, four of the top 25 performing stocks are Japanese.

So, although US companies have made most of the headlines and international markets have lagged the US market, investors should ignore international stocks at their peril.

To do so could mean missing out on some of the best-performing companies in the world.

For more information about international investing, visit our Market Perspectives section.



1  The MSCI World Index captures large- and mid cap representation across 23 Developed Markets countries. With 1,601 constituents, the Index covers approximately 85% of the free float-adjusted market capitalization in each country. Source: MSCI.com. Indices are unmanaged and not available for direct investment.

 

Important Risks: Investing involves risk, including the possible loss of principal. • Foreign investments may be more volatile and less liquid than US investments and are subject to the risk of currency fluctuations and adverse political and economic developments.  

The views expressed herein are those of Schroders Investment Management (Schroders), are for informational purposes only, and are subject to change based on prevailing market, economic, and other conditions. The views expressed may not reflect the opinions of Hartford Funds or any other sub-adviser to our funds. They should not be construed as research or investment advice nor should they be considered an offer or solicitation to buy or sell any security. This information is current at the time of writing and may not be reproduced or distributed in whole or in part, for any purpose, without the express written consent of Schroders or Hartford Funds.

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