Adding to the FANGs By: Gabriel PotterMBA, AIFA® 2017.07.19

Last year, the information technology sector was being undercut by weakness in the FANG stocks – Facebook, Amazon, Netflix, and Google.  With slight revision to the original acronym, the new FAANG stocks (which adds Apple into the mix) have had an incredible 2017, both in terms of fundamental year-over-year earnings growth and technical rewards from a favorable stock market.  While the stock market has been broadly positive for 2017 (up 10% YTD), these key IT stocks are strongly outperforming.  Specifically, Facebook is up 38% YTD, Amazon is up 35% YTD, Apple is up 30%, Netflix is up 30% YTD, and Google is up 24% YTD.  Considering these technology giants are also some of the largest components of the index, attribution analysis would demonstrate that several percentage points of broad market year-to-date gains were directly attributable to these 5 stocks. 

In other words, while there are positive signs of fundamental strength broadly in companies that make up the markets, the positive fundamental and technical factors have not been distributed equally.  In statistical terms, the high mean scores is the result of heavily weighted outliers skewing the average while the median stocks within the index are having a more typical experience.  Curious investors should consider their investment managers’ exposure to some of the key winners over the past 6 months when they are considering how much value is being generated by the portfolio managers.

Gabriel Potter

Gabriel is a Senior Investment Research Associate at Westminster Consulting, where he is responsible for designing strategic asset allocations and conducts proprietary market research.

An avid writer, Gabriel manages the firm’s blog and has been published in the Journal of Compensation and Benefits,...

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