Saturday, 12 May 2018

Investing In Fang Stocks?


If you like gambling, then looking at FANG futures just might be for you.

Remember, trading is trading and investing is investing, and when people mix up the two, they lose money.

At such high valuations, after such a Goldilocks period, at the end of the business cycle, why on earth would you consider these 4 stocks?

FANG: Facebook, Apple, Netflix, Google

These 4 stocks are single-handedly pushing up the S&P and keeping the American stock market average steady.

Something interesting was happening for the last two years, every time the market slumped below the 200day moving average, people bought the FANGs and bought the dip, almost like 'autopilot'.

What we don't see, is very important to mention, you need to read between the lines and dig deeper to see what is really going on in the market.

Most intelligent investors are out of the market and are being cautious and staying in liquid cash. Most of the rise in stock prices is because of buybacks and central bank buying.

Not to mention all those ETFs that are having them in their portfolio, as not investing in them is like missing out and they need the returns to show to their customers.

Portfolio managers routinely do this, go against their better judgement, even if it means making the whole portfolio riskier, they tend not to move too far from the index. Half the portfolio is usually a basic index anyway, so any slump in the market results in all the ETFs going down together.

Blaming it on the index is easier, and it avoids having to take any responsibility.

In may 2017, FANG stocks hit 50% of the NASDAQ 100. This is madness. That's 4 companies becoming half the whole index.

Charlie Munger wasn't kidding when he said,
"The stock market is like a mob at a football game".

No comments:

Post a Comment