During a bear market, tech and other growth companies are generally the ones that experience the biggest corrections in share prices due to poor fundamentals and high P/E ratios. However, it doesn’t change the fact that investing in general is always about future value. Obviously ‘future’ is subjective and will vary from person to person, as some people are looking to invest for 5 years while others are looking to set-and-forget for 20+ years, but the point is – people are essentially making a long-term bet that the company will evolve into a stronger leader in its respective industry.
FANG (Facebook ($FB), Amazon ($AMZN), Netflix ($NFLX), and Alphabet ($GOOG)) have been the 4 powerhouse tech stocks that consistently beat the market. As of August 10, 2017 — while the NASDAQ 100 was up 19 percent and the S&P 500 was up 8.9 percent year-to-date (YTD) — FANGs were up more than 2x that of the latter. Year-to-date, Facebook (FB) was up 45 percent, Amazon (AMZN) 27 percent, Netflix (NFLX) 36 percent and Alphabet’s Google (GOOG) 16 percent, beating the returns of both indices. (Source: Yahoo Finance)
As we reach the peak of the ‘tech bubble’, people have questioned whether the year-over-year growth for FANG is sustainable, while others added to their bullish sentiment with the inclusion of other industry leaders — In Sept. 2018, CNBC published an article that said that Square ($SQ) should be part of the FANG group based on the hyper-bullish sentiment of a Nomura Instinet analyst, who also set a massive price target of $125 per share.
October 2018 – The Motley Fool came out with an article (www.fool.com/investing/2018/10/09/forget-fang-stocks-meet-mana.aspx) titled *Forget FANG Stocks: Meet MANA* (Microsoft ($MSFT), Apple ($AAPL), Netflix ($NFLX), Amazon ($AMZN))
Q3 ERs for most tech companies were disasters – most beat Q2 expectations, but they slipped on the Q4 guidance. Whether you believe that they are sandbagging is up to you, but people hoped that strong ER and Q4 guidance from FANG/FANGS/FAANG/MANA was going to prop up the market from further slide — they didn’t. If I recall correctly, Netflix was the one that had the strongest ER and jumped nearly 13% in the after hours. Apple bombed on their iPhone sales and announced that going forward, they would no longer be reporting iPhone sales unit numbers. People started to question whether FANG had enough innovation left in their tanks to continue to grow and drive expansion.
**So what’s next?** There are a number of advancements that are on the verge of a major breakthrough and adoption:
* Quantum computing
* Internet of Things (IoT)
* Blockchain (this does not necessarily mean cryptocurrencies)
* Gene editing/modification
What technologies are you bullish on for the future? Which companies are you investing for said tech?