Yes, FANG can go down, too. When I looked over the charts this weekend, I was struck by the fact that there are very few stocks that have held up in this endless selling slog we have been going through.
It makes sense that Facebook (FB), Amazon (AMZN), Netflix (NFLX) and Google (GOOGL), now Alphabet, can go higher. In a slowing economy, you want stocks that can go higher regardless of gross domestic product growth, regardless whether the Federal Reserve, in the midst of a downturn, raises rates. (Facebook and Google are part of TheStreet's Action Alerts PLUS portfolio. Amazon is part of the Growth Seeker portfolio.)
Let's go over each one. Facebook put up amazing plus-40% growth, truly astounding given the size of the enterprise. It is pretty clear that the company is just scratching the surface of its earnings power given that the content is made by users and the advertisers are clamoring to add against that copy. Facebook works better on mobile than it does on desktop, and it is a worldwide company where adoption is just getting started overseas. Its growth is in its infancy. It is very easy to see how Facebook could earn $4 per share in 2017, which is how far out you need to think about these kinds of growth stocks. Should this company, with a 40% growth rate, be selling at a little more than 25x earnings? I don't think so.
Amazon is the winner in a moment where retail is just a showroom for the company. At one time it was just Best Buy (BBY). When we see Nordstrom (JWN) and Macy's (M) truly stymied by the lack of traffic, how can we draw any other conclusion than Amazon's taking a huge share? You look at goods in the store with your cellphone and you order them right there. I've done it. You have done it, too. Terrorist activity does not embolden you to go out. It could be a very Amazon Christmas.
Netflix was down last week on Time Warner's (TWX) interest in taking a stake in Hulu. That's all well and good. But is Hulu really a Netflix competitor? Is Hulu really going to cut into the growth of this company? I don't think so. Others obviously agree, too, because the stock is bouncing right back.
Alphabet, née Google, is also a quintessential handheld application with so much that hasn't yet been exploited. I am beginning to wonder when the heck the company is going to think bigger with YouTube. Is it that hard to make it the sports channel for the world? What's the deal? But it will do so eventually even if it has been, at least to me, an abject failure so far, a tremendous underachiever. I don't think it can stay that way.
So what's the deal? I just gave you a ton of reasons to like these stocks. Why talk about how they can go down? I'll tell you why. The holders. I read my Twitter feed and it is discouraging when it comes to these stocks. With the fact that they have gone down ever so slightly when you think longer term and the panic that decline has engendered, you know there are way too many people who don't understand the very concept of stocks. You can have a perfectly good company with a stock that can go lower. Here are four companies with great prospects, but if the stock market is selling off, they can't transcend the gravitational pull.
So I, the biggest champion of FANG, simply want to remind people that these stocks can't stay up forever if the rest of the market is going down. It's a tide. The tide can carry away even the most powerful boats, including these four battleships that have been the ultimate stalwarts in this moment of truth.