The S&P 500 is up 2 percent year-to-date. At a first, an investor might be put off by this mediocre return given the risks involved in the equity markets. However, one has to appreciate that US equities have come a long way and for the market rally to continue, positive data needs to be sustained and converted into a strong earning season.

The S&P 500 has generated decent returns for shareholders over the years. Over a 5-year time horizon, the index is up 72 percent. The problem remains that index is now trading on a price-to-earnings ratio (P/E) of 18.66x, much higher than its mean of 16.56x over the last 10 years. This means that the market is pricing in further improvements in the economic recovery. But until we get concrete evidence of this, equity markets won’t move to another level.

A strong economy means a higher probability of a rate hike and investors don’t like it when the Fed starts tightening its policies. Hence a major contributor to the weak performance of the US markets this year has to be the strong Dollar.

However, for a Maltese investor with an exposure to the US markets, the return is much greater than 2 percent. So far this year, the Euro has weakened a further 10% against the dollar. Add that to the performance of the market and you are already 12% up year-to-date.

The benefit of a weaker Euro which translates into a stronger Dollar is a drawback for US corporates. The strong Dollar makes US exports more expensive putting US companies at a disadvantage compared to their peers. This is one of the reasons for the mediocre return from US equities so far this year.

Nonetheless, there are stocks in the US which have generated exceptional returns for shareholders this year, way much better than the return of the general market. The top five performing stocks in the S&P 500 so far this year have been as follows:

Netflix Inc (Market Cap: $48.5bln, % Return YTD: 133%) 

Netflix Inc. is an Internet subscription service for watching tv shows and movies. Subscribers can instantly watch unlimited TV shows and movies streamed over the Internet to their TVs, computers and mobile devices and in the United States, subscribers can receive standard definition DVDs and Blu-ray Discs delivered to their homes.

Amazon (Market Cap: $307.3bln, % Return YTD: 111%)

Amazon.com, Inc. is an online retailer that offers a wide range of products. The Company's products include books, music, videotapes, computers, electronics, home and garden, and numerous other products. Amazon offers personalized shopping services, Web-based credit card payment, and direct shipping to customers. 

Activision Blizzard, Inc (Market Cap: $27.2bln, % Return YTD: 85%) 

Activision Blizzard, Inc. publishes, develops, and distributes interactive entertainment software and peripheral products. The Company's products cover diverse game categories, including action/adventure, action sports, racing, role playing, simulation, first-person action, music-based gaming and strategy.

Expedia, Inc (Market Cap: $17.8bln, % Return YTD: 61%) 

Expedia, Inc. provides branded online travel services for leisure and small business travelers. The

Company offers a wide range of travel shopping and reservation services, providing real-time access to schedule, pricing and availability information for airlines, hotels, and car rental companies. 

Electronic Arts, Inc (Market Cap: $23.1bln, % Return YTD: 58%) 

Electronic Arts Inc. develops, publishes, and distributes branded interactive entertainment software worldwide for video game consoles, personal computers, handheld game players, and cellular handsets. The Company also provides online game-related services.

 

This article was issued by Kristian Camenzuli, Investment Manager at Calamatta Cuschieri. For more information visit, www.cc.com.mt. The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.  

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