Investing

Why Investors May Fear the FANG Stocks in 2016

Wall Street and market pundits love to come up with acronyms for certain investing strategies and groups. The term that took off in 2015 was FANG, for Facebook, Amazon Netflix and Google. Other terms that have taken off in the past have been the Nifty Fifty, BRIC, MINT, 4 Horsemen and so on.

The FANG stocks did incredibly well in 2015. If you average out these four stocks, the year-to-date gains in the FANGs was 88%, versus right at flat for the Dow Jones Industrial Average and the S&P 500.

But what about 2016? It turns out that finding the great bulls in the stock market is becoming harder and harder. A recent view of 14 Wall Street strategists from Goldman Sachs, Merrill Lynch, JPMorgan, Credit Suisse, Wells Fargo and other top firms is calling for minimal gains in the S&P 500 in 2016. If the market remains choppy, the question that remains is whether the FANG stocks can come anywhere close to outperforming by this massive amount again.

24/7 Wall St. looked into the upside that got the FANG stocks to their height today. We also considered the downside potentials that could act as a drag ahead. These are not at all meant as predictions, and these are not forecasts that these risks will actually come true. Sometimes it is worth looking at both sides of the coin in major gainers to determine if upside remains.


Another consideration here is that analysts on average see upside in the FANG stocks. Many investors might also wonder why Apple Inc. (NASDAQ: AAPL) is not a FANG stock. Facebook Inc. (NASDAQ: FB) is the absolute leader in social media, and Mark Zuckerberg wants it to be much more in the future. Amazon.com Inc. (NASDAQ: AMZN) is the leader of online sales in just about every retail topic and has massive growth potential in business services and new target markets. Netflix Inc. (NASDAQ: NFLX) is by far the leader of online video subscriptions, and its international efforts could lead to growth for a whole generation shift for years and years. Google, now Alphabet Inc. (NASDAQ: GOOGL), wins in its core markets for online search and mobile operating systems, and its growth into tangent markets may seem limitless.

It is hard to not notice that the real FANG stocks have no dividends. Included in each review is the “what’s working now” and the potential risks, as well as stock performance and valuation metrics, and additional color.

Facebook

Facebook undoubtedly has recovered massively from its post-IPO woes. The social media giant has performed well on mobile and desktop, has become an ad platform, wants to be a news platform and wants to be a tech center for virtual reality. Its performance has so far been about 37% in 2015, making it the weakest performer of the FANG stocks. Even the telegraphed donation and exit of the massive Zuckerberg stock sale plan for the years ahead did not crush Facebook’s stock.