Topline: The once high-flying FAANG stocks—Facebook, Apple, Amazon, Netflix and Google parent Alphabet—have mostly lagged the broader S&P 500 index over the past year, signaling that the market may turn to new leadership for the next leg of its advance.
- With the recent exception of Apple—which reached a new record high last week, the FAANGs have been in somewhat of a slump, as high price volatility takes a toll on their long-time status as momentum stocks.
- Amazon and Facebook are both 13% off their record highs, while Netflix is down 31% from its peak last year; Google, on the other hand, is just 4% from its record high.
- These popular, high-profile names have driven the bull market to new heights in recent years, and as a result were increasingly treated as parts of a whole when it came to trading patterns.
- But over the last 6 to 12 months, the FAANGs have not been leading the market as they once did, with Wall Street now pricing in slower growth rates, rising costs and the potential for more government oversight.
- “These stocks have made people a lot of money, but they won’t trade as a group the way they did for several years,” says Charles Lemonides, chief investment officer of ValueWorks LLC.
- Lemonides predicts that Wall Street will increasingly stop talking about the FAANGs as a group, as they go from being growth stocks absolutely adored by the investing public to companies that are perceived to have their own different business challenges.
Key background: Analyst recommendations are increasingly varied on each of the FAANGs, which adds to the notion that they aren’t viewed as a group anymore. Most Wall Street analysts still assign “buy” ratings, though: 52% for Apple, 87.5% for Alphabet, 69% for Netflix, 96% for Amazon and 87% for Facebook, according to Bloomberg data.