People love acronyms.
NASA, CDC, AARP or any of the other new ones the kids are using in their text messages nowadays.
But finance has their fair share of acronyms too…
NYSE, NASDAQ, S&P – we all know these guys because of how much money they’ve made investors over the years.
However, there’s a new acronym that’s been rearing its head over the years – one that investors should start paying a little more attention to…
Because it could end up “biting” them if they’re not careful.
I assume that you have heard of the various FAANG stocks by now…
You may not know what each letter stands for off the top of your head…
But FAANG is an acronym for the market’s top five superstar stocks that people love – namely Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Google (GOOG/GOOGL) – some love these stocks for their performance, others for their “cool” factor – but either way, people are paying attention to FAANG stocks.
These stocks are practically in a category of their own…
You can’t call them tech stocks – even though they are sellers of technology.
You can’t call them communication stocks – because they do so much more than link the world together.
The FAANG stocks are in an industry, and a class, unto themselves – with almost no ceiling on the amount of money they can earn and almost infinite ways for the them to make that money.
Yeah, these stocks have it good and their shareholders will be quick to tell you that…
But as amazing as these companies are and as much money as they’ve brought to their investors – they’re not untouchable.
Last week, one of the stocks, Netflix, took a beating – a legitimate beating – giving the company its worst week it has had in over two years.
Shares dropped almost 10% in one day of trading. 10%!
And while it recovered some of those losses the next day – the stock has been on a steady decline ever since.
The worst part? Revenue and earnings are very good!
Netflix even BEAT its earnings estimates, so you’d think it’d have been a shoe-in for a price bump, but because revenue was below what analysts expected – its price nosedived.
Add in the fact that subscriber growth was lower-than-expected – the first time Netflix missed its subscriber forecast in 5 years – and it all starts to make sense.
But it begs the question…
Are the FAANG stocks worth it?
Take Netflix, the company may be having a low moment right now – but that’s not likely to be the case for long – as Netflix has so much more potential for growth.
Right now, Netflix currently holds 60% of the market share in the U.S. – which is HUGE…
However, internationally speaking, Netflix only holds 15% – and should have no problem building on that number over the next few years.
Which means Netflix is probably only going to get bigger.
The fact that they’ve gotten beat up may make them a perfect “buy” opportunity – as shares may not get a whole lot cheaper than they are now.
So, while the FAANG stocks may not be untouchable – they seem pretty much bullet proof, at least for the time being.
Facebook survived a political scandal, Apple survived the death of Steve Jobs,
Amazon survived a monopoly charge, Netflix is surviving their woes and Google, well…
Google is Google.
There’s really only one big draw back for the FAANG stocks – their price. Freeing up room in the portfolio to afford to buy these stocks could be a heavier hit than you’d want to work with…
But in the long run, it may be worth it.
However, regardless of whether you take a nibble, a bite, or pass on these companies – the effect they have on the overall market is unlike anything I’ve ever seen before.
In fact, their reach is so wide – that they can often sway the entire market.
A big up day or a down day for some of these companies has a domino effect – and depending what a company does or which industry it’s in– those days can send waves rippling throughout the market.
Which is exactly why I rely on my proprietary GorillaTrades system; it’s able to find the next potentially explosive stock pick – in any market condition, no matter who is leading the market higher or lower.
But, as I always say, it’s up to you…
We’ll be here when you’re ready.
“In this business, until you’re known as a monster you’re not a star.” – Bette Davis