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Market Update

What This Year's Top-Performing Funds Own

Stock holdings favored by 2021's top-performing active funds are dramatically different from last year's.

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For a while, it seemed like there was a simple formula for chart-topping returns: Load up on the large, growth-oriented stocks that dominated the market for most of the past five years. The so-called FAANG stocks--Facebook (FB), (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG)--consumed more and more of broad market benchmarks such as the Morningstar U.S. Market index. Such stocks now make up a combined 18% of the index, and accounted for about half of the benchmark’s 20.9% total return in 2020. Companies lauded for their ability to create or disrupt entire industries, such as Tesla (TSLA), posted even bigger gains.

Even the market downturn in early 2020 didn’t significantly change these overall trends. While the overall market dropped 34.5% between Feb. 19 and March 23, 2020, there was a sharp divergence in performance for different investment styles. Morningstar’s Large Growth index was down about 30.9%, compared with a 47.7% loss for the Small Value index. Technology stocks also were relatively unscathed by the market downturn, while more economically sensitive areas suffered sharp losses thanks to fears about the potential economic impact of the global coronavirus pandemic.

Amy C. Arnott has a position in the following securities mentioned above: AAPL. Find out about Morningstar’s editorial policies.

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