Displaying items by tag: faangs

(Silicon Valley)

Those with a lot of money in tech stocks may be starting to breathe a sigh of relief. After a rough period to start the year. The last few weeks has been quite positive for tech, so the worst may be behind us, right? The answer is that it may not be, according to some analysts. There are two huge trends (and one macro factor) that look likely to weigh on the sector for the next year. Firstly, three of the very largest stocks—Facebook, Apple, and Google, have gotten to the point in size where their growth is going to start inevitably slowing, which means the narrative around them will change. Additionally, the success of the vaccine rollout is increasingly, which means a reversal to pre-COVID norms seems likely. Tech stocks are also quite rate sensitive, which gives them a lot of “Fed risk”.


FINSUM: While it is hard to argue with the interest rate risk, we cannot get on board with the other two narratives. Everyone knows FAANG stocks are huge, the growth story is no secret. More generally though, we just don’t buy into the narrative that these stocks will suffer from the “reopening”. Consumer habits in many areas (e.g. grocery shopping and increased food delivery) have changed and that will continue to allow big tech stocks to grab market share and grow. Just ask your grown children and friends how they feel about going back to the grocery store….

Published in Eq: Tech
Wednesday, 22 July 2020 15:46

BlackRock Is Bullish on Big Tech

(San Francisco)

For a lot of people, BlackRock brings two things to mind: fixed income and ETFs. Therefore, the firm making a bold call about a handful of single name stocks comes as somewhat of a surprise. However, BlackRock is the largest asset manager in the world and is also a leader in equities. The call they are making today is that big tech companies are looking strong and likely to keep seeing price expansion. On the one hand, this is a very easy call to make given tech stocks have been soaring, but on the other, it is somewhat of an interesting and risky call because many fear FAANGs can really only go down in the short-term. BlackRock says that the cash flow producing abilities of tech companies (a factor proven to be vital in this downturn) will be critical to their continued success.


FINSUM: There might be some short-term tailwinds, but in our view, big tech companies are going to keep moving higher because this crisis has created a huge opportunity to grab market share as more of life moves online.

Published in Eq: Tech

(Seattle)

Investors might be growing a little uneasy if they have been paying attention to market leaders. A number of stocks that have led the big market rally are starting to falter, and that could be a sign of a major pullback to come. Amazon, Zoom, Netflix and other leaders of this rally have recently plateaued or dipped, which could be a sign that the rally has lost strength. If those stocks start to lose ground, a lot of the gains the market has seen are at risk because of the chance that investors could capitulate once the indexes loses leadership. One equity strategist at BTIG put it this way, “We’d suggest that the ability for the broad market to build on its recent gains is contingent on names like Zoom, Moderna, Netflix and Amazon and other highflying ‘shelter-in-place’ names whose momentum has waned in recent days, to at least sustain their meteoric advances as leadership passes off to the more cyclical areas and themes”.


FINSUM: We think there is a degree of truth in this. If the big gainers start to fade, it is hard to imagine the laggards will suddenly start holding the market up.

Published in Eq: Total Market

(San Francisco)

Investors have made cash the only thing that matters in markets. The Dollar is surging and investors are fleeing assets in favor of cash. Cash is a scarce and valuable asset in this downturn, and which companies have a ton of it—tech companies. While the Silicon Valley giants will take a hit from lower consumer spending, the reality is that the shutdown of normal life is pushing things ever more online—their domain. As this crisis eventually abates, giants like Apple, Microsoft, Google, and Amazon, have huge cash reserves (currently $350 bn) that will help them attract shareholder capital, and also grab market share as competition gets weeded out.


FINSUM: Tech is probably going to be in a stronger position in a year than it was six weeks ago. Their fortress balance sheets will be key.

Published in Eq: Tech
Thursday, 24 October 2019 08:41

The FAANG Rally Will Fade

(San Francisco)

A prominent fund manager has just come out with a bold and bearish prediction—that the big multi-year surge in FAANG stocks will fade. Rob Arnott of Research Affiliates says “Will these stocks produce such impressive growth that they will justify their current market cap, or are these implausible growth expectations? We don’t have a crystal ball, of course, but we would recommend not betting on the momentum continuing”. Overall, FAANGs account for $4.2 tn of market cap, a huge concentration in such a small group of stocks, and a big threat to the overall bull market. Arnott is considered the founder of smart beta and has turned Research Affiliates into a firm that manages $184 bn.


FINSUM: The basic argument here is that FAANG valuations have simply grown too large relative to other sectors and are bound to come down. But what is the catalyst?

Published in Eq: Tech
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