FAANG as of 8/5/2017

To many, FAANG stocks define the market. To me, a conservative investor, it is not. For market-cap ETFs such as SPY, FAANG has more weights than other stocks. As a group, FAANG has been very profitable for the last year. To me they seem to be risky today. The following tables summarize them and I’ll check them one year later and/or after September (usually the worst month) to confirm my findings. It is also a case of momentum vs. value.

All the info are available free in web sites such as finviz.com. All data are based on 8/5/2017. They are for info only and I’m not liable for any errors. Returns are annualized and dividends are not included.

Stocks	Current Price 8/5/17	From 8/5/16 to 8/7/17	From 8/7/17 to 8/7/18	From 8/7/18 to 10/7/18
FB	169.62	37%	7%	-84%
AMZN	173.85	29%	88%	2%
AAPL	156.39	48%	30%	48%
NFLX	180.27	48%	94%	-4%
GOOGL	945.79	17%	33%	-47%
Avg.1	247.41	44%	50%	-17%
Beat SPY by		214%2	233%	-440%
SPY		14%	15%	5%

¹ All averages in this article are estimates.

² Beat = (44% - 14%) /14=214%. Similar to other calculations for “Beat”.

Fundamentals as of 8/5/2017

Stocks	P/E	P/E FWD	P/S	P/B	Debt/ Eq.	Sales Q/Q	EPS Q/Q	ROE
FB	37	26	15	7	0.00	45	69	23
AMZN	16	14	6	4	1.11	2	18	27
AAPL	18	15	4	6	0.73	5	10	35
NFLX	221	90	8	25	1.55	32	58	13
GOOGL	34	24	7	4	0.03	21	-28	14
Avg.	65	34	8	9	0.68	21	25	22
Beat SPY 1	164%		277%	186%
SPY2	25		2	3

¹ Very rough estimates.

² Most fundamental metrics are from other source than finviz.com, so there may be small discrepancy.

Technical as of 8/5/2017

Stocks	SMA50%	SMA200%	RSI(14)	52-week height	Short%	Insider Trans.
FB	8%	23%	67	-3%	1%	-86%
AMZN1	35%	8%	51	-6%	1%	0%
AAPL	5%	17%	63	-2%	1%	-31%
NFLX	10%	26%	59	-6%	6%	-69%
GOOGL2	-2%	8%	41	-6%	0%	0%
Avg.	11%	16%	56	-5%	2%	-37%
Beat 3  SPY by	1020%	173%	-9%

¹ Recent double top. Bearish.

² Multiple top.

³ Very rough estimates.

The two SMA (Simple Moving Average) technical metrics are positive.

Summary

As a group, FAANG is fundamentally unsound but technically sound compared to SPY. I said the same on the market.  As suggested, use trailing stops if you own any of these stocks. When they turn to be technically unsound, this is the time to exit. They could stay in the current valuations for a long time. However, when the institution investors are dumping them, they will fall very fast and steep. SMA-20% would be a good indicator for exit. NFLX is the most fundamentally unsound.

Update 8/7/2018. The rosy pictures of these stocks have been priced in. I recommend to sell the stocks with P/E over 35 unless you have good reasons not to. It is insurance to protect your profits. Even if they still rocket higher, you still have a good sleep. When any bad news occurs, it would rocket back to earth. Newton’s Law of Gravity?

Update 12/3/2018. From 8/7/18 to 12/3/18 (yesterday), FAANG lost 75% annualized while SPY lost 35% annualized without including dividends.

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The above is an abstract from my book "Complete the Art of Investing" which is available from Amazon.


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