Apple and Tesla Outperform other Tech Giants

As soaring interest rates hammer technology stocks, the shares of Apple (AAPL) and Tesla (TSLA) have have fared better than other well-known names.  Apple is down only -15% this year, and Tesla is down by -22%.  In contrast, Alphabet (GOOGL), Amazon.com (AMZN), and Microsoft (MSFT) have all declined -29% or more, roughly the same as the Nasdaq 100 Index ($IUXX) (QQQ). 

Apple, with a market value of $2.4 trillion, and Tesla, with a market value of $862 billion, benefit from flows into funds that track major indexes.  Also, Ziegler Capital Management said the companies are less tied to the business cycle than other tech-related stocks, which “means a little less recession fear and a little less fear about what the Fed is doing.”

Ziegler Capital Management also said that with the switch to electric vehicles from combustion vehicles just beginning, “Tesla will see growing support as a market leader in electric vehicle technology.”  Meanwhile, “Apple gets a huge amount of its revenue from subscriptions or a recurring base, which means it’s more stable.”

These attributes have made both stocks the most popular for retail traders.  According to Vanda Research, Apple and Tesla were the most purchased stocks by retail investors over the past week to September 21.

The immense cash flow of Apple and its commitment to return money to shareholders via dividends and buybacks have made it a favorite for investors seeking to play defense amid concerns the Fed’s interest rate hikes will push the U.S. economy into recession. According to Bloomberg data, Apple’s valuation at 23 times profit projected over the next 12 months is well above the company’s average over the past ten years, although it is still less than half the price of Tesla.

Ziegler Capital Management said that in today’s market, where investors are avoiding risk, being relatively insulated from economic cycles thanks to a loyal customer base makes Apple and Tesla particularly attractive.  “The reason they’ve outperformed is the reason we want to continue to own them.”

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