If this bull market will be remembered for one thing, it will be for the dominance of FANG. The famous foursome of Facebook, Amazon, Netflix, and Google (and Apple if you prefer FAANG) has been one of the main drivers of the U.S. equities market for most of the last 5-6 years. As Bloomberg noted earlier this year, at one point those four stocks had combined to generate a ridiculous 38 percent of the S&P 500’s gains over a six-month period.
Unfortunately, two of the four FANG stocks, Facebook and Alphabet, have stalled so far in 2018. Following last week’s market sell-off, Google is up just 4 percent year-to-date and Facebook is down 12.3 percent on the year. Those aren’t exactly the types of returns that keep momentum traders interested. However, a new group of stocks, the NASA group, has sent traders’ returns to the moon in 2018.
The FANG trade may have run into problems in 2018, but it’s not Netflix’s fault. Even after a pullback following a second-quarter subscriber miss, Netflix shares are still up 68 percent year-to-date. Netflix has a history of bouncing back following disappointing quarters, and Netflix’s global expansion is showing no signs of slowing down as it starts to penetrate the massive Indian market.
Like Netflix, Amazon is a FANG original that hasn’t lost its swagger in 2018. Even at roughly a $1 trillion valuation, Amazon’s e-commerce and cloud services have continued to grow quarter-over-quarter. In the most recent quarter, revenue was up 39 percent, and AMZN is up another 48 percent this year. Amazon also recently entered the physical retail space with its Whole Food grocery acquisition and its Amazon GO concept stores, and its fledgling advertising business has major room for expansion.
Shares of Square took a beating last week, plummeting more than 25 percent on concerns over the company’s exposure to credit risk and the departure of long-time CFO Sarah Friar. Despite the bump in the road, Square has still roughly doubled in 2018, and its digital payments space gives it major exposure to one of the largest secular growth trends in the business world today. In the most recent quarter, revenue was up an eye-popping 60 percent, and seasoned momentum traders know that red-hot momentum stocks like Square will always be subject to volatile pullbacks.
With a year-to-date gain of 146 percent, Advanced Micro Devices has been the best-performing S&P 500 large-cap tech stock of 2018. Demand for AMD’s Radeon graphics cards, Ryzen PC CPUs and EPYC data center processors drove an impressive 53 percent revenue growth in the second quarter. Perhaps more importantly, production issues at rival Intel Corp have left its dominant 99 percent market share of the server market exposed, and analysts say AMD has a window of opportunity to make some headway in stealing clients away from Intel.
Disclosure: The author holds no position in the stocks mentioned.
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