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My Top Stock Picks Review

Daniel Laboe

I wrote a piece near the bottom of the COVID-crisis on March 19th called My Top 10 Watch List, now I want to dissect my picks. I want to look at how and why they performed the way they did. The market has rallied an incredible amount since mid-March, and hopefully, you were able to reap the same strong returns that I was the past 4 months.

My Picks

Tech stocks have been the relative outperformers in the past few months, with the world experiencing 5 years of digitalization in 5 months. Innovation-driven growth stocks made up the largest portion of my gains since mid-March, as I sure you have experienced in your portfolios.

My 10 picks were intended to provide investors with a wide range of high-quality stocks that would maintain liquidity amid the highly uncertain times and were poised to drive returns throughout the Roaring 20s. As a whole, my picks (equal-weighted) outperformed the S&P 500 by 4 percentage points.

Below are the 5 outperformers from My Top 10 Watch List. 

Splunk (SPLK)

Splunk was my high-risk/high-reward play, and its performance has illustrated that with a soaring share price from the March bottom. SPLK rallied over 90% since the article, with the markets pricing back in the necessity of this enterprise’s real-time data management.

With the world moving towards full automation, managing, analyzing, and providing actionable outcomes on machine data is going to be a requirement for businesses to stay competitive. Splunk’s market control of this niche segment makes the stock incredibly attractive.

I’m not looking to add to my SPLK position until we see a pullback as the shares have risen to very frothy levels.

Splunk Inc. Price, Consensus and EPS Surprise

Splunk Inc. Price, Consensus and EPS Surprise

Splunk Inc. price-consensus-eps-surprise-chart | Splunk Inc. Quote

Microsoft (MSFT)

Microsoft has been a powerhouse of stock since March 19th, driving returns of 57% for those investors lucky enough to in at this time. Microsoft’s sizable cloud product breadth of essential software and digital business necessities has continued to drive this cutting-edge enterprise to new seemingly impossible levels.

MSFT is being pushed to new all-time highs seemingly every day. Microsoft has been driving innovative growth in the equity markets for decades, and I’m confident it will continue in the decade ahead. Again, I will not be adding to my position in MSFT until I see a broader tech pullback.

Microsoft Corporation Price, Consensus and EPS Surprise

Microsoft Corporation Price, Consensus and EPS Surprise

Microsoft Corporation price-consensus-eps-surprise-chart | Microsoft Corporation Quote

Invesco Nasdaq 100 ETF (QQQ)

QQQ is being propelled to continuously new highs by the trillion-dollar club, aka Apple (AAPL), Amazon (AMZN), and Microsoft (MSFT). These three innovation-driven enterprises makeup roughly 1/3rd of QQQ and have driven the ETF to the stratosphere with returns of more than 57% from March 10th.

This an excellent ETF option that I would highly recommend holding in your portfolio for the anticipated technological revolution of the Roaring 20s. Still, I would wait for a pullback before I considered adding to my position.

Invesco QQQ Price

Invesco QQQ Price

Invesco QQQ price | Invesco QQQ Quote

Adobe (ADBE)

ADBE, MSFT, and QQQ all tied for second on my March 19th watch list, with each of them appreciating roughly 57%. ADBE’s sails have been filled with a pandemic-driven tailwind that has propelled the “stay-at-home” cloud market.

Adobe is a legacy software player that has been able to stay ahead of the innovative curve for decades. Adobe was able to transition its essential business software to a cloud-based offering successfully.

The enterprise was an early mover on cloud computing, which has propelled ADBE shares to continuously new highs. These shares have outperformed the S&P 500 by almost 10-fold in the past 5 years. I expect this relative outperformance to continue as this trailblazing tech giant continues to expand.

Adobe’s subscription-based business model has allowed the company to grow its sales quarter-over-quarter for more than 5 years. Expanding revenues by more than 20% while producing large growing profits is a feat that very few companies can claim.

Adobe Systems Incorporated Price, Consensus and EPS Surprise

Adobe Systems Incorporated Price, Consensus and EPS Surprise

Adobe Systems Incorporated price-consensus-eps-surprise-chart | Adobe Systems Incorporated Quote

Alibaba (BABA)

BABA shares are just starting breakout of their COVID trading rut since the beginning of July, driving 20% growth since the beginning of this month. BABA is relatively undervalued from my perspective, and I would still consider these shares a robust buy around the $250 per share price level.

Alibaba controls the e-commerce space (80% market share), as well as its cloud-computing category (roughly 50% market share) of the most populous and soon-to-be-largest economy in the world.

Alibaba is valued at less than half of Amazon despite producing substantially wider margins, much stronger profitability, and having a much larger topline growth outlook for the next couple of years.

I expect big things out of BABA in the coming decade.

Alibaba Group Holding Limited Price, Consensus and EPS Surprise

Alibaba Group Holding Limited Price, Consensus and EPS Surprise

Alibaba Group Holding Limited price-consensus-eps-surprise-chart | Alibaba Group Holding Limited Quote

The Takeaway

The equity market has run up quite a bit these past 4 months with tech leading the way. We are approaching Q2 earnings season, and these seemingly stretched valuations in the tech sector will be put to the test. I would be cautious with any stock purchases going into this earnings season. Investors may be looking to pull profits with technology stocks illustrating parabolic gains the past few months.

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Splunk Inc. (SPLK) : Free Stock Analysis Report
 
Invesco QQQ (QQQ): ETF Research Reports
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
Alibaba Group Holding Limited (BABA) : Free Stock Analysis Report
 
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
 
Adobe Systems Incorporated (ADBE) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
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