Consensus Tech Stocks Outperform Benchmarks, But With Higher Volatility
A recent study compared the performance of technology stocks recommended by leading financial publications with traditional benchmarks such as the S&P 500, Gold, and Bitcoin over four different investment horizons.
The study found that consensus technology stock recommendations generally outperformed the S&P 500 and Gold in three out of four periods, but underperformed in 2021 due to valuation contractions in high-growth companies. The 2023 basket produced the strongest broad-based outperformance, driven by a powerful technology-led bull market.
The study also highlighted the importance of diversification, as equal-weighted baskets consistently reduced portfolio risk relative to holding individual stocks alone. However, superior returns were accompanied by higher volatility, with every technology basket experiencing a larger maximum drawdown than the S&P 500 over the corresponding investment period.