Sometimes we forget why FANG is FANG. The stocks that make up the acronym -- Facebook (FB) , Amazon (AMZN) , Netflix (NFLX) and Google (GOOGL) , now Alphabet -- plus their fellow travelers, Apple (AAPL) and Nvidia (NVDA) , are rocket-ship names, and, yes, rocket ships do return to Earth periodically. When they do, they inspire selloffs like this one.
In fact, we had two rocket ships at work today, FANG and Rocket Man himself, Kim Jong Un, a nuclear menace who has become the short-sellers' best friend, this time with his new act-of-war declaration on fly-overs as well as near-incursions.
Often we have situations where, when the FANG rocket ship crashes to Earth, we get a rally in the staples simply as a knee-jerk response that coincides with a flight to safety.
The bond-market equivalent aspect of these stocks, and here I am speaking of a Kimberly Clark (KMB) or a Clorox (CLX) , comes to the fore as enough risk-averse money floods into U.S. Treasuries that their yields again become competitive. I am sure the buying seemed vociferous enough that some would muse that maybe it takes actual war fears to move up the shares of companies that make canned soup, cereal and Velveeta, all required fallout-shelter staples. As someone who grew up on a block where those houses with fallout shelters traded at a premium to those that didn't given the Cuban Missile Crisis, I understand the imperative. Still, I can safely say that it is the yield, not the necessity to stockpile foods that can withstand the radiation fallout from thermonuclear war, that drove the buying.
Let's reset the clock for a second here, though. Before the new North Korean threat surfaced in the a.m., we saw something that's not all that common in the market: a rally in the inexpensive stocks of some really old-line companies, like General Motors (GM) and Ford (F) , as well as a surge in the oil stocks given oil's flirting with $51. Historically, that's the level where oil fails and I sure don't want to rule that out. Every time we do that, oil fools us.
Perhaps, though, there's another way to look at it. Perhaps what we're seeing is a reversion to the cheap and a repulsion to the dear. Periodically, we get enough doubt in the FANG stocks that we say, what the heck, we are truly in outer space with these stocks. The air's too thin to breathe.
At the same time, we survey the landscape and say, what the heck is the stock of General Motors selling at such a discount to the entire market when it, too, is a fount of technology. In fact, a research note that discussed how much intellectual property GM has assembled helped drive the stock of the automaker to new highs. Yes, a case can be made that GM is too cheap. I just wish it didn't have to be made when estimates may be too high because of a slump in U.S. sales, as GM cut back a shift in sports utility vehicle manufacturing because of waning demand.
Still, the contrast was stark in the stocks that worked their way higher today and the ones that had trouble maintaining their worth against the gravitational pull of the selling of all highly valued stocks. Each winner has a reason for winning away from the pedestrian dividend story. All the losers suffered a uniform fate regardless of the news flow.
Let's get some examples out here so you know what I am talking about. First, there's the stocks of the phone companies, namely Verizon (VZ) and AT&T (T) with attractive yields of 4.75% and 5%, respectively. It is true that if interest rates are going down because the leader of North Korea says our president has declared war against his nation, you want to buy companies with big dividends. You also, though, have the story that my colleague David Faber broke today on Squawk on the Street, that T-Mobile (TMUS) and Sprint (S) intend to merge. Obviously, three phone companies are going to be less competitive than four -- meaning your bills are going to go higher -- so perhaps Verizon and AT&T will earn more money than we think.
We know the oils are rallying, but there's more to it than that. We are hearing rumblings of mergers in the drilling business. After so many years in the price-cutting wilderness, it's about time these companies thought about getting together.
The hunt for value, which is often categorically opposed to the love for the lofty, brought buyers back to the airlines, too. Yes, it is certainly counterintuitive to have the price of crude go higher at the same time that the airline stocks are taking off, but you need to think of the airlines not as consumers of oil but as undervalued companies with shares as cheap and as unexploited as the stocks of the oils, not the oil business itself. What do I mean by unexploited? Sometimes there is a sense that when you buy a stock of a company that sells at eight times earnings, the way the stock of United Continental (UAL) trades, you are buying something with less risk, betting that someone else will spot the value, and your portfolio will increase in value.
Finally, there are the retailers. Talk about value, these stocks are just out and out hated, and that hatred has created as much value as the love for FANG has created great excess. So, you have a stock like that of TJX Companies (TJX) soaring today simply because it's been too unloved. Why not? Sometimes an unloved stock can become loved if it surprises to the upside, and that's exactly what one of my favorite analysts, Matthew Boss of JPMorgan, says will happen when the company reports. (Facebook, Apple, Alphabet, Nvidia and TJX are part of TheStreet's Action Alerts PLUS portfolio.)
Lots of retail seems inexpensive. The sales for Home Depot (HD) continue to be strong after the hurricanes. The dollar stores are doing just fine. Their pricing's certainly competitive to that of the suddenly unloved Amazon. Gap Stores (GPS) continues to outperform, as is often the case when your stock yields 3% and your earnings are coming in sharply better than expected.
Now let's talk about the flipside. We know tech's had the run of the joint for ages. But starting last week, we heard rumblings that the sales of Apple's new phones may not be as robust as we thought. That quickly reverberates down the food chain of suppliers. Is it true? I look at Apple as a much cheaper consumer-product story than, say, a Colgate (CL) or a Procter & Gamble (PG) , so I am willing to bet that next year will be a good year and that sales will firm as the rollout of new products occurs.
So, call me a buyer. Maybe that's me being a throwback and urging you to own, not trade, Apple. But Wall Street encourages trading and that means buying high and selling low -- or at least that's been the case for ages.
Is there anything wrong with Facebook? Regulators are examining it. Maybe that's enough for now. Amazon? I can always make a case that Amazon's overvalued. Look at my Twitter file, there are Amazon bashers galore. Netflix is strictly one of those stocks that are in the eyes of the beholder. I see people going long one creator of content, CBS (CBS) , and shorting another, Netflix, and who am I to disagree with that given how expensive the latter is and the ridiculously cheap nature of the former.
So is this it? The end of FANG and company?
I can tell you the news clip files are filled with FANG obituaries and each one seems as cogent as the previous epitaphs.
That's why I like to have one foot in the rocket ship and another in the terrestrial. Call me old-fashioned, but when the stock of Facebook gets crushed as it did today, I am more attracted to it than when it's soaring. I feel the same way about the stock of Alibaba (BABA) or Nvidia or Electronic Arts (EA) . Sure, they might be cheaper tomorrow. That's the risk you take. But these stocks didn't get where they were a week ago by alchemy. They got there because the companies are doing phenomenally and I don't see anything that tells me they won't.
I just see profit-taking in the winners and a love of the losers. Own some of both, in a portfolio not just diversified by sector but by riskiness, and you'll do just fine.