The phrase the FANG stocks, which was coined by CNBC’s Jim Cramer, represents five high flying technology stocks, Facebook (FB), Amazon.com (AMZN),Netflix (NFLX), and Google’s parent company Alphabet (GOOG - GOOGL). Cramer coined the phrase because how incredible these stocks where performing when compared to other technology stocks, or the market as a whole. These stocks have been market leaders for a few years, during which time we have seen their valuations go through the roof. But, the old saying on Wall Street, “stick with what’s working” has simply continued to work with the FAANG stocks. Until recently.
Facebook, Amazon.com, Netflix, and Google’s parent company Alphabet have all now reported quarterly earnings for the second quarter and while Amazon, Google, and Netflix didn’t get destroyed like Facebook, the group combined with Apple (AAPL), had lost $185 billion in market value during the last few days of trading in July. This decline had some investors wondering if the FANG rally is over, while others are considering this a good buying opportunity.
I personally am in the latter camp considering Gross Domestic Product figures came in at 4.1%, the recent job reports have all been strong, and despite some issues, mainly caused by those in Washington, all economic data indicates that the US consumer and economy is strong.
Furthermore, a strong case can be made that Facebook hurt itself regarding growth due to changes it is implementing following the data scandal back in the spring. The stock fell 19% in one day after reporting earnings. For the most part, the rest of the FANG stocks reported good quarterly earnings from most points of view, despite perhaps not topping lofty expectations set by Wall Street analysts.
With that said, there are plenty of people in the former camp, who believe the FAANG rally is dead and these stocks should be avoided, so do your own research before making a call one way or the other. But if you decide you want to buy the dip, here are a few Exchange Traded Funds that you can buy to do that, and at the end I'll throw one out there that you can use to short the FAANG stocks.
First and foremost, we have the First Trust Dow Jones Internet Index Fund (FDN) which currently has the four FANG stocks controlling the top five spots in terms of assets. Amazon.com representing 10.62% of the fund, Facebook making up 7.71%, Netflix at 5.74%, and shares of Class C Alphabet at 5.44% while Class A Alphabet is at 5.41%, or a total of 34.92% of the fund. FDN is going to be the only ETF that gives investors this amount of exposure to the FANG stocks, without using leverage.
The next option is the Invesco NASDAQ Internet ETF (PNQI) which has Alphabet Class C shares at 8.84% of the fund, Amazon.com at 8.64%, Netflix at 7.83%, and Facebook at 7.07%, for a total of 32.38% of total fund assets. Furthermore, Booking Holdings (BKNG) is the fourth largest holding in the fund at 7.66%, larger than Facebook.
Besides the two mentioned above, your next best options would be to go with ETF’s such as the AdvisorShares New Tech and Media ETF (FNG), the Invesco QQQ Trust (QQQ), the iShares Core S&P 500 ETF (IVV), or the Technology Select Sector SPDR Fund (XLK) which will all give you exposure to the FANG names. But these ETF’s don’t currently have all four FANG stocks in their top 10 holdings at this time. But, that is not to say that will not change in the future.
Now if you want direct exposure to the FANG stocks but want to trade them more so than buy and hold essentially, well there are some options for that as well. The BMO REX MicroSectors FANG+ Index 3X Leveraged ETN (FNGU) and the BMO REX MicroSectors FANG+ Index -3X Inverse Leveraged ETN (FNGD) offer three times leveraged exposure to the FANG names. Obviously, FNGU will offer exposure if you think the FANG names are going to move higher in the near term, while FNGD offers the inverse exposure which you would want if you believe the FANG stocks are going to be moving lower shortly.
FNGU and FNGD have been trading since January if this year and while FNGU has grown to $88 million in assets FNGD only currently has $23 million in assets. Over the last three months FNGU is up 30% while FNGD is down 31%, but over the last month, the story is different with FNGU down 7% and FNGD up just a little more than 2%.
It should also be noted that FNGU and FNGD consider Apple to be apart of the FAANG group in addition to the other four company’s traditionally known as the FANG stocks, but both funds hold positions in additional companies which operate in the technology and consumer discretionary sectors and share similar characteristics as the FAANG stocks.
Hope this helps everyone, but regardless of whether you believe the FAANG stocks go higher or lower, I hope no one gets hurt by the FAANG! (Sorry I know it’s terrible, but I still had to say it!)
Matt Thalman
INO.com Contributor
Follow me on Twitter @mthalman5513
Disclosure: This contributor held positions in Facebook, Amazon.com, Google, Apple, and Netflix at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
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