US stocks are outperforming ASX shares in the COVID-19 rebound and Australian investors are hopping onboard this trend.
While the S&P/ASX 200 Index (Index:^AXJO) performed remarkably well during the coronavirus meltdown, US equities have raced ahead, particularly the tech-laden Nasdaq Composite (INDEXNASDAQ: .IXIC).
Aussies are joining in the party as US tech stocks are among the favourite their picks in the month of June, according to investment platform eToro.
Racing to the top
Electric car icon Tesla Inc (NASDAQ: TSLA) tops the list of US stocks being snapped up by Aussie investors last month – at least that’s the case for eToro’s clients.
The stock recently reached a record high despite its founder Elon Mask’s attempt to talk it down by questioning its lofty valuation.
“Tesla’s share price was up more than 22 per cent in June as it went on to breach $1,000, smashing its record high,” said eTora analyst Josh Gilbert.
“The electric vehicle giant is the world’s most valuable carmaker and can put its recent success down to improved sales in China.
“A recent email leaked from Tesla CEO Elon Musk saw the share price surge more than 8 per cent in June, as Musk showed optimism the company could break even in the second quarter.”
Taking big risks
However, there are a few interesting US stocks among the top 10 list. One that stands out for me is car rental company Hertz Global Holdings Inc (NYSE: HTZ), which is trading under bankruptcy protection.
The pandemic forced the overindebted group to its knees and the outlook isn’t so good as international travel looks to be off the agenda for a while yet.
But investors have been happy to buy the stock despite the very real risk that they will lose everything. The flood of liquidity from central banks may be one reason why retail investors are clambering to climb the risk curve with greater gusto than professionals.
Other interesting stocks on the list include aircraft maker Boeing Co (NYSE: BA) and carrier American Airlines Group Inc (NASDAQ: AAL). Perhaps Aussie investors are looking for an alternative to Qantas Airways Limited (ASX: QAN).
Investing in blue-chip US stocks is one way to gain diversification in your portfolio as long as you know what you are doing and can spend the time doing your homework.
But there are real concerns about overstretched valuations for some of the more popular US names. While sometimes it can pay to run with the crowd, those that are happy to follow the herd will need to be nimble.
If the tide turns, and that’s a question of “when” not “if”, stocks that have climbed the highest have the farthest to fall.
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Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Facebook, and Tesla and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon and Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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