Of the mega-cap names ($500 billion-plus) in the Nasdaq that performed best in 2020, one stood out for also providing outstanding returns in the first quarter of 2021. During a period in which Amazon, Tesla and Apple stock failed to stay above water, Microsoft stock increased its market value by another 7%.
The Apple Maven, usually focused on shares of the Cupertino-based company, looks at how the second most valuable company in the US managed to reach such heights, while its peers struggled to lift off.
Much better than peers
MSFT beat the performance of AAPL, AMZN and TSLA by at least 10 percentage points – see chart below. What is perhaps most impressive is that the outperformance came on the heels of 40%-plus returns in 2020 and gains of nearly 60% in the previous year.
Against the S&P 500 in the first quarter of 2021, Microsoft stock squeezed in about one percentage point of alpha (i.e. returns in excess of the benchmark). The gains were even better compared to the tech-rich Nasdaq index. Microsoft also beat the consumer discretionary and tech sectors, as well as the FAAMG group of Big Tech stocks.
Here are a few interesting facts about Microsoft stock’s performance in the most recent quarter:
- Day-to-day volatility reached 25% annualized, which was better (i.e. lower) than Apple’s 33% and Amazon’s 27%;
- The maximum peak-to-trough decline was only 7%, in the three weeks around the end of February, compared to Apple’s 19% and Amazon’s 13% drawdowns;
- On the very worst day, Microsoft saw a drop of only 2.9% in share price, vs. Apple’s 4.2% and Amazon’s 3.4% declines.
The good and the bad of the quarter
Below is a short list of the most important macro-level and company-specific events that impacted Microsoft share price in the first three months of the year.
- Not unlike its peers, Microsoft stock performed much better in January, especially around Big Tech’s earnings week. Investors seemed excited about the prospect of superior financial results, and the Redmond, Washington-based company did not disappoint.
- Things took a turn for the worse in late February and early March. The rise in yields and the market’s dash towards cyclical stocks put a damper on Microsoft’s impressive year-to-date run up to that point: up more than 10% in the first six weeks of the year.
- Other company-specific could have derailed Microsoft shares, including the Exchange Server breach of early March. However, the stock stood strong, and even moved higher towards the end of the quarter.
Microsoft was among the better tech picks in the first quarter, but will this also be true in the second period? I asked Twitter for a bit of help on this question.
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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)