FAANG is back, long live FAANG. Or did FAANG never go away only its supporters disappeared. It sure is worth finding out because its defining trading now and it's making people think "do I really have to go back to those stocks?"
The answer regrettably for those who have bailed, is perhaps yes. Let me go over the case for each one so you know why I feel that way.
Let's start with Facebook (FB) which ignited today's rally. This morning JP Morgan (JPM) named it one of its best 2019 internet ideas. Why? Because Facebook is "stickier than many think with recent metrics mostly stable and our proprietary survey work shows solid engagement, while Instagram continues to grow rapidly." The analyst also made it clear that "revenue deceleration is manageable" and high expenses are now baked in.
That's all well and good. But let me give you the real reason why it has stopped going down. Journalists lack new revelations about how bad Facebook is ethically. No one came forward from the company and said "let me tell you what a pack of liars management is." No one named names.
Without some real Facebook confidential book being written right now pretty much everything that can be written has been written. Do you really want to read another story about how the Russians used Facebook to get you do to things you otherwise wouldn't have done? Are you still outraged that they sold your info to many companies as a matter of course? My biggest worry here is that so much of their MO is betrayal of your trust then their estimates could be too high. How do you measure the betrayal per share? What 's the discounted cash flow of stonewalling? What's the price per "All The Presidents Men" book?
Those are problems alright but without new grist, without more to feed the maw of hatred, people are back using Instagram around the world and the advertisers still love the darned thing because other than the NFL they aren't reaching people because of cord cutting.
Sorry, journalists. Sorry ethicists. If you shoot the king you have to kill the king.
King Facebook wasn't killed.
How about Apple (AAPL) ? Today we spent some time with CEO Tim Cook talking about how the Chinese situation could be ephemeral if we get a trade deal and I think there will be judging by what Tim had to say. More important, I feel confident that the Service revenues and the other revenues, whether they be the watch or the airpods -- both capacity constrained -- and the Macs themselves are going to make a bigger and bigger piece of the pie. The oddity is that some of these analysts would be happier seeing Apple's smartphone units go down so the whole revenue pie is more service and accessory. How stupid is that? Remember if this company were followed by consumer products analysts it would be trading at about $230 right now as it has more growth than any of the consumer packaged goods companies and the business is really very good away from China and some emerging markets.
I reiterate after talking to Tim the analysts just don't know how to value it so they value it as a pure hardware company and not a razor blade company where customer loyalty still brings in income from the Apple iPhone 5 for heaven's sake. And credit for innovation? Unless Tim invents a wayback machine like on Rocky and Bullwinkle I don't know if anyone will be satisfied. How about beam up Timmy?
Amazon (AMZN) ? I don't even know what to say other than it turned out to be an Amazon Christmas. We know Prime rocked. What we also have seen is that many of the cloud kings, especially ones affiliated with Amazon, have been on fire. That's a good sign because the data center had seemed to have peaked as a theme. Not any more. I think that it's the gold standard and it's the cheapest and the best although I am in awe of the franchise that Satya Nadella has built at Microsoft (MSFT) . The recent shake-up at Alphabet's (GOOGL) Google Cloud tells me that this has become a two horse race with others including Google, Oracle (ORCL) and IBM (IBM) in the periphery. I am looking for Amazon to expand via Whole Foods and anyone who remembers the old crew there knows the plan was to almost triple the store count. I do not think they will buy the old Sears stores. They want strip malls for easy pick-up.
I am not where legendary fund manager Bill Miller is on Amazon; yesterday he said on CNBC that it will double. But I do think that $2000 -- $330 from here -- is a legitimate target given that the market's returning to technology.
I have no idea how the stock of Netflix (NFLX) has rallied almost 20% this year. I mean when I say I have no idea I mean that I thought it would be down given all of the money they have to spend to get content. It is a real conundrum. I love to watch Netflix. I think that the company is amazing. At this point, though, it is reflecting a re-acceleration of growth in both domestic AND international and I am not so sure that 's right. I would be careful of 20% even as it is 100 points from its high.
Finally there is Alphabet formerly known as Google and it is a total black box. No one knows how it is doing. No one. No one knows how the autonomous driving initiative is going. No one knows if there is a pick-up in advertising. No one knows if they are monetizing YouTube effectively. No one knows how the other moon-shot businesses are going, the other bets that are recruiting some very good talent.
All I can say is that it is inexpensive with a lot of cash and great optionality. I just wish they would use it. Two hundred points from its high, though, my trust owns it and I am tempted to tell the members of the Actionalertsplus.com club that this one may be ripe for a run with even a sighting of CEO Larry Page who is the modern day Howard Hughes. Younger people give it a Google.
I am sure that the last shake-out, the one that brought Amazon down to the $1,300s to use the best example of a $1,600 stock, obliterated a ton of capital and made investors feel that it was a total mugs game. It is entirely possible that Facebook could be. Somewhere there might be a group of journalists who haven't yet written critical stories about what a bunch of hooligans they are.
Yet without bad publicity you may have a real rally here because those who were going to downgrade will look at the action and say, I am holding in at this point. It is too late to sell.
But is it too late to buy? With the exception of Netflix, I don't think so. Too much opportunity even among the likes of Facebook if only for a trade.
