What Do The Top Stocks Of 2018 Have In Common?

Looking across the top performers of 2018, you’d see something that you probably haven’t seen since coming out of The Great Recession: large-cap names that performed exceptionally well. We’re talking names that literally doubled when they were already massive, to begin with. Take Amazon for example. Starting the year the company was already one of the largest by market capitalization in the world, along with CEO Jeff Bezos being one of the wealthiest people. Fast forward to today, and it’s double the share price. Consider that for a moment – one of the world’s largest companies doubled in value in less than a year!

Not every company was created equal. The S&P 500 isn’t even up double digits for the same time period. The Nasdaq moved up nearly 20% for the year. So what can we learn from the top performers of 2018?

Technology Rules

Outside of the regular smattering of bio and pharma stocks that make up the small caps, one of the things you’d notice about the top companies is that many of them are technology-related. In fact, of the Mega-cap stocks, 2 of the top 5 are IT companies, and you could argue that Amazon and Netflix should be part of that classification as well.

Consider the following information on Microsoft and software infrastructure.

You have Microsoft, an $861 billion market-cap company that’s up nearly 30% on the year. Compare that to Intel who’s up a measly 5.33% with semiconductors as a whole up 10.73% YTD. So what gives?

Much of the disparity lies in where and how the company operates. Companies like Intel still rely on consumers to purchase their hardware. When they want to sell more, they have to make more. Microsoft and software infrastructure companies sell software and services that are scalable. Even Amazon derives a significant portion of its revenues from its web services.

However, NVIDIA sits as an outlier. They provide the GPU cards that are all the rage amongst artificial intelligence programmers and data scientists. But consider where NVIDIA was a handful of years ago. Prior the explosion of AI programming, the company made money, but generally sat in relative obscurity. Unlike the larger companies like Intel, NVIDIA only had a market cap of $9.1 billion in 2013, compared to Intel’s of $128 billion at the time. Consequently, NVIDIA just had more room to grow to its current market cap $170 billion.