Apple Inc (NASDAQ: AAPL), Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG) and Amazon Inc (NASDAQ: AMZN) are three of the biggest and best companies in the world. Is it too late to buy?
First of all, why would an Australian ASX investor be looking at US shares?
Short answer: global diversification.
We’ve all heard the importance of investing in different companies, industries and sectors but if all of your holdings are based in the same country, you won’t be saved in a market crash or a recession.
That’s why investing in foreign markets is so important. It further mitigates some of the risks associated with shares. For instance, one study found that the US and Japan share markets only had a correlation of 38%, meaning a US investor who invests some of their portfolio in the Japanese share market might be far more diversified than someone who invests only in the US.
Another study found that investors who are wealthier and more experienced are more likely to invest in foreign securities than the average investor.
Finally, another really important reason to consider investing overseas is the opportunity set. More than 98% of the world’s stock market investments are found outside Australia. Some industries, therefore, are under-represented here in Australia so looking abroad is important.
The following footage from The Australian Investors Podcast explains ‘home country bias’ and how it might impact investors who are focused only on Australia.
Amazon is a Seattle-based technology company with operations in e-commerce, cloud computing, digital streaming and artificial intelligence. Amazon is arguably one of the most innovative companies in the world and is among the leading companies in some very high-growth areas.
For example, recent ABS data highlighted the growth of cloud computing in Australian businesses. AI is another hot sector and is expected to be one of the major investing megatrends in the coming decades.
In 2017, Amazon’s revenue growth was 30.8% and another 30.9% in 2018. However, Amazon’s first quarter of 2019 showed a slower growth rate than usual of 16.96% year-on-year. Overall, the share price sits marginally below the all-time highs that were set last year.
Apple is another company that most of us interact with daily in one form or another. One of its biggest competitive advantages is its brand.
You see, people don’t just like Apple, they love it. Similar to Tesla Inc (NASDAQ: TSLA), the supporters of Apple seem to sometimes border on fanatical, and that’s a great thing for the company in terms of pricing power and loyalty.
This Rask Media article highlights more of the advantages Apple has, but some of the main points are an increase in services revenue and a very solid balance sheet. Like Amazon, you can buy Apple shares right now for less than you could in October 2018.
Alphabet Inc / Google
Alphabet Inc, the owner of Google, is headquartered in Mountain View, California. Google is among the largest companies in the world and it’s another one that most of us couldn’t go a day without.
Not too long ago, I wrote an article about how Google invests in a way that allows them to grow revenue by 20% year-on-year and generate a return on invested capital (ROIC) of more than 20%.
Google itself is highly diversified and is not afraid to branch out into other industries with what it calls “other bets”. In other words, calculated investments in what they think will be the next big growth area.
Personally, I trust that Google can pick the next big trends better than I can, so investing in Google could be a good way to get a slice of the growth.
Earlier this year, for the first time since 2015, Google reported revenue growth of less than 20%, causing the share price to drop. You can currently pick up Google shares for around 15% less than you could in April.
While the share prices look high, I believe all three of these companies could make suitable long-term investments. Or, if you don’t want to pay $1,000 or more for one share, an ETF that invests in all three could be another option.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).
Disclosure: At the time of writing, Max does not own shares in any of the companies mentioned.