 | | | | Time to Throw Out FAANG and Become a MAAN | | Matthew Carr, Emerging Trends Strategist, The Oxford Club | | | | | | | Editor's Note: Welcome to Energy & Resources Digest! You probably have a bunch of questions about what to expect and how to get started.
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- Rebecca Barshop, Managing Editor | | | | | The broader indexes are fake.
That's what irritates me most about them.
They're market cap weighted... a formulation I despise.
I don't think portfolios should be constructed that way. And I don't believe indexes should either.
With market cap weighting, too much power - both good and bad - is given to a handful of the largest companies. And the realities start getting blurred.
Let me show you what I mean.
This is the Invesco S&P 500 Equal Weight ETF (NYSE: RSP) versus the S&P 500... Toward the end of 2018, there were a few times when the S&P was up almost 2.5% year to date while the Equal Weight ETF return was negative.
That's because just five companies - 1% of the S&P's total holdings - accounted for nearly half of all gains and losses on the index.
What are those five?
Facebook (Nasdaq: FB), Amazon (Nasdaq: AMZN), Apple (Nasdaq: AAPL), Netflix (Nasdaq: NFLX) and Google parent company Alphabet (Nasdaq: GOOG). More commonly known as "FAANG."
They're some of the most heavily weighted components of the S&P, meaning their moves up and down have a pronounced effect on the broader index.
Apple was the world's first $1 trillion company. At its peak, Amazon hit that mark soon after.
Facebook and Google are tech giants in their own rights, while Netflix is far and away the world's largest streaming service.
These are the companies that represent the new economy - the digital economy. And for years, FAANG has been a popular investing theme.
Most importantly, though, it's been a very profitable one... Again, if most of the market's gains come from FAANG, it makes sense that owning them will result in market-beating returns. | | | Perfect Stock Caught Trading Under Secret Name... - $164 billion in expected sales
- Earnings per share up 106%
- More than 29,000 U.S. patents
- Billions in sales contracts with top tech giants...
And somehow it trades for only $3 per share! Find out the shocking reason the perfect stock trades at such a cheap price here. | | | But there's a fly in the ointment... or maybe a better analogy would be a couple of cavities in the FAANG.
Facebook and Google have struggled recently. And they've really lagged their brethren... We can see that big drop in Facebook shares as second quarter earnings missed. And the company had an enormous data breach that came to light in September.
On top of that, Facebook and Google are at the center of the data privacy storm brewing across the globe.
Even Apple CEO Tim Cook has fired a number of shots at Facebook. Like in October, when he lashed out at Google and Facebook for collecting massive amounts of data on their users.
Now, I'll admit, Facebook and Google probably benefited from a divisive midterm election. If you still have a Facebook account, you probably noticed how many political ads were dumped into your feed.
But concerns are looming about their long-term prospects. They might continue to be the laggards in FAANG.
So there's a new acronym floating around. It's all about dumping Facebook and Google from the mix and replacing them with Microsoft (Nasdaq: MSFT).
That gives us "MAAN."
Not only has Microsoft outperformed Facebook and Google over the last 12 months, but it's performed quite well over the past five years, gaining 185%. That outpaces the return of Google during that span. And that's all thanks to Microsoft's nearly 2% dividend yield.
At the same time, Microsoft's Surface tablet continues to gain ground. It recently moved into the top five best-selling PCs, behind Apple. Of course, there's a big divide between No. 4 and No. 5... But it shows that Microsoft's hardware sales are gaining momentum.
Almost as soon as FAANG was dubbed, investors began wondering when its reign would finally come to an end.
I don't think it's going to be anytime soon for the majority of the group, but Facebook and Google are starting to look vulnerable.
Maybe it's time to pull those two from the group and become a MAAN.
Good investing,
Matthew | | | | | | | | | | | "Steal" This Book Now - We'll Help You...
Bloomberg Radio host Carol Massar said live - on the air - that her co-workers were literally "trying to steal" her hardcover copy of an Amazon No. 1 best-selling book off her desk.
"Everybody wanted the book!" she said.
HURRY! We've got an exclusive link so you can claim a free copy of the hardcover right here! | | | |
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