From July 2022 onwards, my wife and I built a new mini-portfolio of shares. We bought 10 UK FTSE 350 shares and seven mega-cap US stocks. And the recent performance of our new pot has been driven by four US mega-cap tech stocks.
Going long on tech stocks
At first, we built this new portfolio on high-yielding FTSE 100 and FTSE 250 shares. We aimed to generate solid and rising dividend income over time.
Later, we agreed that our portfolio was too skewed towards value shares. So we looked around for growth and tech stocks to add to our holdings.
When US tech stocks tumbled in October and November 2022, we seized the chance to buy four mega-cap growth stocks at deeply discounted prices.
These are the technology shares we bought just before the US midterm elections (sorted by market value):
| Company | Share price | Market value | One-year change | Five-year change |
| Apple | $168.35 | $2.66bn | +6.6% | +266.3% |
| Microsoft Corp | $305.39 | $2.27bn | +7.4% | +220.9% |
| Alphabet | $105.43 | $1.34bn | -9.6% | +100.6% |
| Amazon.com | $102.70 | $1.05bn | -17.5% | +29.9% |
Note how huge these Goliaths are. Apple (NASDAQ: AAPL) alone is worth almost as much as the entire UK stock market (£2.42trn). Also, the consumer-products behemoth is almost twice as large as Google owner Alphabet (NASDAQ: GOOG). Whoa.
While these tech stocks have produced mixed returns over 12 months, all four are ahead over five years. The biggest winner is Apple, which has turned $1,000 five years ago into $3,663 today. Nice.
Why we bought these stocks
We decided to buy into these mega-cap corporations because they have huge competitive moats around their businesses.
Apple has perhaps the most loyal customers on earth. Microsoft (NASDAQ: MSFT) is going great guns in cloud computing and artificial intelligence. No search engine comes close to Alphabet’s Google. And Amazon (NASDAQ: AMZN) is the world’s #1 online retailer, with the highly profitable Amazon Web Services (AWS) thrown in.
We also bought at that time because tech stocks had been under severe pressure in the run-up to the US midterms. Also, with some shares crashing 50%+ from their November 2021 highs, I felt this tech sell-off had gone too far.
In short, these four tech stocks appeared to be value shares to us back then. But only time will tell whether we were right.
Now for the bad news
Here’s how these four popular stocks have performed since their 3 November closing prices:
| Company | Change since 03/11/22 |
| Apple | +21.5% |
| Microsoft Corp | +42.5% |
| Alphabet | +26.4% |
| Amazon.com | +15.5% |
| Average | +26.5% |
These shares have risen by between around 16% and 43% in under six months. Across all four stocks, the average return is more than a quarter. But I’m not patting myself on the back quite yet.
These shares are priced in US dollars, but we bought them with sterling. The bad news is that the British pound has since appreciated strongly against the dollar. In early November, £1 bought $1.14. Today, the exchange rate is $1.25.
In other words, this 9.7% increase in the GBP/USD rate has reduced the value of these four tech stocks by a similar amount in pounds. In a nutshell, that’s currency risk for you.
Of course, I could be wrong. Tech companies could encounter another earnings downturn, as in 2022. Indeed, some analysts predict lower margins and cash flows in tech. But I’m still happy with these long-term buys!
