Few investors enjoy an S&P 500 sell-off. But some younger investors are positioning themselves for the winners coming out of it.
Gen Z, the youngest cohort of investors, aged 24 or younger, are doubled down on a unique blend of mainly consumer discretionary and information technology stocks like Tesla and Apple. But they also continue to hold onto their speculative plays like AMC, says an Investor's Business Daily analysis of data from Apex Fintech Solutions. Apex analyzed more than 1.3 million brokerage accounts held by investors born after 1996 as of March 31, 2022.
Not surprisingly, these stocks aren't working out well this year at all. Following the S&P 500's 2.8% drop Tuesday, the SPDR S&P 500 ETF Trust is now off nearly 10% this year. Together, all investors including Gen Z have lost roughly $7 trillion this year, says Wilshire Associates.
And all 10 of Gen Z's top holdings are down this year, too. But young investors still think they're positioned for the future.
"In other words, what we have seen is a typical, if sharper than usual, market cycle. In the short term, it is painful. But in the longer term? It really doesn't mean much," said Brad McMillan, Chief Investment Officer for Commonwealth Financial Network.
Tesla: Gen Z's Top Pick
No one can accuse Gen Z of simply following the S&P 500. Their top position, at 19.2% of portfolios, is electric-car maker Tesla. Certainly, the antics of CEO Elon Musk draw many people into the stock.
In contrast, Tesla is only the No. 4 top holding in the S&P 500 with a roughly 2.3% weight in the index. It's only natural to think many piled on following the "millionaire maker's" huge run in 2021. Shares of Tesla jumped nearly 50% just last year.
But it's been a rougher ride this year. Shares are down more than 15.5% this year. Some investors worry Musk is distracted with his newest corporate plaything: Twitter. But expectations for Tesla are still huge. Analysts think Tesla's profit will roughly double this year to $12.26 a share on more than 60% higher revenue of $86.7 billion.
That's not to say, though, Gen Z is completely going their own way. Their No. 2 position is Apple, which is the dominant stock in the S&P 500. Again, following the 33.8% jump in the shares of the smartphone maker in 2021, owning it was easy until now. But this year, shares are off more than 11%.
Gen Z Isn't Spooked From Speculation, Yet
One of the top surprises this year is how Gen Z continues to hold highly speculative stocks that are crashing.
Amazingly, volatile theater chain AMC continues to be this cohort's No. 3 position. Many piled on in 2021 when the shares rose more than 1,183%. But the trade has gone violently the other way this year, falling more than 42%. Analysts continue to think the theater chain will lose nearly $500 million this year. That's an improvement from the $1.2 billion it lost in 2021.
Similarly, Gen Z clings onto the original meme stock: GameStop. It's still their No. 9 top holding despite falling 13% this year. It's yet to generate fundamentals to justify its 687% jump in stock value last year. And analysts think it will lose another $331 million in 2022.
It's unclear how long the market's current sell-off will last. But it's clear Gen Z is looking at the long game, or at least not scared out of short-term plays just yet.
Top Stock Holdings Of Gen Z
| Rank March 31, 2022 | Company | Symbol | 1-Year % Ch. | YTD % ch. | Sector |
|---|---|---|---|---|---|
| 1 | Tesla | 21.0% | -15.5% | Consumer Discretionary | |
| 2 | Apple | 17.0 | -11.2 | Information Technology | |
| 3 | AMC Entertainment | 35.8 | -42.6 | Communication Services | |
| 4 | Amazon.com | -17.8 | -16.0 | Consumer Discretionary | |
| 5 | Microsoft | 3.5 | -19.5 | Information Technology | |
| 6 | NVIDIA | 22.3 | -35.6 | Information Technology | |
| 7 | Walt Disney | -36.7 | -24.7 | Communication Services | |
| 8 | GameStop | -23.6 | -13.0 | Consumer Discretionary | |
| 9 | Meta Platforms | -39.9 | -45.9 | Communication Services | |
| 10 | Alphabet | 3.3 | -16.9 | Communication Services |
