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Are FANG Stocks Losing Their Shine?

Chris Dios - September 30, 2019

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If you’re new to investing, you may be watching CNBC and listening to Jim Cramer talk about FANG stocks (or FAANG stocks) and saying to yourself, “what the heck is fang?”.

Believe me, I know. I was once one among you. Today, I’m here to tell you that FANG is not a company. In fact, FANG is an acronym for the top 4 high-growth stocks that powered 2018’s epic rally.

What Are Fang Stocks

FANG represent the leading tech stocks on the market. These are the leading growth stocks on the market. These four (or five) stocks make up an enormously disproportionate chunk of the S&P 500, so the theory goes that the market will follow the FANG stocks whichever direction they go; up or down.

So what are the FANG Stocks? Let’s break it down:

facebook laptops shadows

Facebook, Inc. (NASDAQ: FB)

With a market cap over half-a-trillion dollars, Facebook is a behemoth of a company. The social media megalodon has infiltrated practically every corner of our day to day lives, and it’s still hungry for more. This company has its fingers in everything from virtual reality to crypto.

Amazon.com, Inc. (NASDAQ: AMZN)

Did Facebook’s $500 billion market cap get your attention? How about $860 billion? That’s Amazon’s valuation at current levels. Amazon briefly touched a trillion-dollar valuation before the market took a dive at the end for 2018, but who’s splitting hairs about few hundred billion dollars?

Like Facebook, Amazon is everywhere and keeps getting bigger. CEO Jeff Bezos is one of the richest people on the planet and he’s willing to try anything. In addition to the company’s ridiculous e-commerce business, Amazon Web Services is practically printing money.

Netflix, Inc. (NASDAQ: NFLX)

One of the stars of last year’s big rally, Netflix has lost a lot of its luster since this time last year. With Comcast (NYSE: CMCSA), Apple, Disney (NYSE: DIS), Amazon, AT&T-Time Warner (NYSE: T) and more throwing their hats into the streaming arena this year, the competition is starting to get thick for Netflix. The stock really hit a wall over the summer when Netflix revealed that its missed its subscriber estimates by a large margin in the second quarter of 2019.

netflix laptop

With Disney Plus and Apple TV+ retailing for less than half the cost of a basic Netflix package, things are sure to get tighter for Netflix. The market might be too down on this one but, even with the startling declines, this stock is still trading for over 100 times forward earnings.

It could get worse before it gets better for Netflix.

Google, Inc, (NASDAQ: GOOGL)

Google practically owns the internet, so it’s one of the most important stocks in the S&P 500. This large-cap tech stock is posting solid numbers in 2019, but there may be trouble on the horizon. Several factions of the government are gearing up for big tech antitrust raids, and Google is firmly fixed in their sites.

Regulatory issues haven’t hurt the company too much in the past, but the anti-corporate rhetoric heated up significantly in 2019. Google could be a risky play going into an election year with a democratic field that is sounding that battle cry against unfair corporate practices.

FAANG Stocks??

If you’ve seen the extra ‘A’ in FANG, it includes one more company in this lineup of corporate titans.

Apple Inc. (NASDAQ: AAPLE)

Believe it or not, Apple is the most valuable company on this best tech stocks list. Apple is worth just about $1 trillion dollars in market capitalization, making it one of the most valuable companies on planet Earth. Apple doesn’t just make money off iPhones and iPads, services are becoming an increasingly important part of the firm’s business model. Between the App Store, healthcare, and other services, Apple is hedging its bets against a weakening iPhone upgrade cycle. CEO Tim Cook is one of the best in the business and he’s proven the haters wrong time in and time out.

CNBC’s Jim Cramer’s favorite line: “Don’t Trade Apple, Own It.”

Are FANG Stocks Still a Buy?

Tough question. These companies comprise a huge portion of the S&P 500. It’s hard to imagine the market gaining a lot of significant ground unless these companies come along for the ride. That being said, it’s the stock market is a touch place for big tech right now. Most of these companies are under siege from anti-trust investigations and Federal, State, and even local levels.

Words like ‘break up’ are being tossed around in conversations about Facebook, one senator even asked the company to sell Instagram and WhatsApp outright. Google is under a consistent barrage of anti-competitive practices accusations. Ditto for Apple, who critics say abuses its authority over the iOS app store, and Amazon is regularly accused of unfair relating to both its labor force and its online marketplace.

Closing Thoughts

With a wave of left-leaning democrats set to hit the ballots next year, this is a tricky time to buy FANG stocks. A trade war between the world’s two largest economies is already putting the market on edge, and the economy is downshifting from its high-octane 2018 expansion. Add that in with a spreading global slowdown and you’ve got the recipe for some very anxious investors.

It all depends on your time horizon. If you’re going to hold these stocks for years, then buying might not be a bad idea. If you’re looking for short-term gains, I suggest you proceed with caution. The market for FANG stocks looks like it will be plagued with uncertainty in 2020.

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Chris Dios is an American writer and entrepreneur based in the Greater NYC area.

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