In this car crash of a stock market, it may well be worthwhile to focus on the companies that will largely endure whatever investors throw at them.
Indeed, companies that significantly outperform the overall market.
So let’s look at the “FANGs.”
It was CNBC madman-in-chief Jim Cramer who coined the term when referring to a hyper-growth quartet of tech stocks…
Last year would’ve been a great time to own their shares…
Compare that to the overall Nasdaq exchange, which only returned 5.7%, while the Dow Industrials shed 2.2% and the S&P 500 posted a marginal 0.7% loss.
With 2015 in the books – and 2016 off to the worst start in history – it’s worth taking a look at these bellwether tech outperformers. But with a warning…
Judging the FANGs – Should You Buy or Sell?
While many investors found it profitable last year to let the momentum carry them, regardless of valuations, momentum only carries you so far. Eventually, these companies need to deliver what they’ve promised… or at least justify the valuations they attained last year.
So let’s take a look at each FANG stock and assess the prospects for this year using three metrics – value, growth, and competition – and whether you should buy or sell.
Value: At 95 times its trailing earnings, Facebook is expensive. However, earnings are growing so the forward price-to-earnings (P/E) ratio is a slightly more reasonable 33. But the price/earnings-to-growth (PEG) ratio, which incorporates earnings growth relative to the share price, is still very high at 3.1.
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