Is It Too Late To Buy The FANGs?
The super performers of the past 10 years or so have been Facebook, Amazon, Netflix and Google (now known as Alphabet). So much so, that they are collectively known by their acronym ‘FANG’.
My first reaction to that is: BEWARE of acronyms!
When an investment strategy achieves impressive results, this information is usually disseminated in the market very quickly. And when someone comes up for an acronym for it – it has often peaked by that stage.
Remember BRIC? Brazil, Russia, India and China were all growing rapidly 10 years or so ago, and many investors believed that this is where most of the world’s growth would come from in the next decade in economic terms. However, no sooner than the acronym was bandied about and those economies went into reverse!
But let’s be objective. Let’s have a look at the charts and see what that tells us.
The results of the technical analysis (contained in the Member’s Section) are as follows:-
Outlook is moderately bearish.
Amazon
Outlook is bullish.
Netflix
Outlook is bearish.
Google (Alphabet)
Outlook is bullish.
So two are bearish and two are bullish per the charts!
In terms of business models, Facebook and Netflix appear to be more vulnerable. Facebook trades in personal information and that could become more difficult as legislation relating to privacy (such as GDPR: Global Data Protection Regulation) begins to bite. The weakness in Netflix’s business model is, perhaps, that it will have to pay increasingly large sums for content.
The other two, Amazon and Alphabet are similar in that they provide the framework through which much of the commercial world operates.
And what of P/E’s and dividend yields?
The data is as follows (sorry, I am unable to write ‘the data are’ – I guess it was the way I was taught..):-
Historic P/E: 31
Dividend Yield: Nil
Amazon
Historic P/E: 72
Dividend Yield: Nil
Netflix
Historic P/E: 107
Dividend Yield: Nil
Alphabet
Historic P/E: 24
Dividend Yield: Nil
Phew! Pretty high expectations priced in there, don’t you think?
Alphabet comes up trumps in the financial ratio analysis, particularly in view of the huge mountain of net cash on the balance sheet and it has the lowest P/E.
So the verdict is, Alphabet: Yes, Amazon: Maybe, Facebook: Probably Not, Netflix: Definitely Not.
AYAMFPNNDN?
No, not catchy enough.