The FAANGs have been the most popular stocks on Wall Street for some time now and for good reason. Facebook [FB], Apple [AAPL], Amazon [AMZN], Netflix [NFLX] and Google [GOOG] have a total market cap of approximately $3.5 trillion.
To put that into perspective—that’s more than the UK’s 100 biggest companies put together.
They’ve witnessed increases that range between 100-600% over the last three years. If you’re looking to check out how the indices have fared during this period, the numbers played out relatively low in comparison—the NASDAQ Composite generated 67%, while the S&P 500 [SPY] could returned around 40%.
Although the FAANG stocks account for almost half of the NASDAQ index, the massive rise in stock prices have worked in their favor—helping them substantially increase investor wealth and easily beat index returns.
Innovative products and business models
The FAANGs managed to completely disrupt several tech verticals by focusing on innovation and catering to specific needs.
Apple launched the iPhone in 2007 and is now one of the global leaders in smartphone manufacturing. It has managed to compete with other tech giants such as Samsung, comparatively new companies like Xiaomi and disrupt business models that were followed by former market leaders such as Nokia and BlackBerry.
In August 2018, Apple was the first US-based company to reach a market cap of $1 trillion.
The breakout success of Amazon Web Services propelled the firm to profitability and sent its market cap soaring. Amazon recently touched the $1 trillion market cap and is currently valued at a whopping $952B.
Facebook’s biggest bet was on building one of the world’s biggest social media network—and it paid off mighty well. The company’s net profits have risen from $53 million in 2012 to $16 billion in 2017.
Netflix isn’t lagging behind, either. It’s benefitted immensely from the cord cutting phenomenon and the shift towards streaming services. From a DVD rental firm in the 1990’s to the leading online streaming content company, Netflix has delivered significant returns to its shareholders.
Google realized the potential of the internet and created a revolutionary product nearly two decades ago. Google’s Larry Page and Sergei Brin were willing to sell Google to Altavista for a paltry $1M in 1998 which did not move forward. Yahoo joined the same bandwagon, and turned down an offer to acquire Google for $5B in 2002.
Google has wasted no time in diversifying into multiple revenue streams and briefly overtook Apple as the most valuable company in 2016.
Has the Downturn Started?
The upward spiral of FAANG stocks has been likened to that of the tech bubble during the dotcom crash of 2000. We saw a ton of e-commerce companies blow up and burn cash, eventually leading to a worldwide market crash.
Recently, data revealed that short bets for FAANGs increased 40% year-over-year to a whopping $37B at the end of August 2018, indicating a negative sentiment in the stock market.
Amazon prices slumped lower by 5% last week shortly after the company reached its $1 trillion valuation in intra-day trading.
The sluggish global market environment, trade war tariffs, and other macroeconomic factors have impacted FAANGs stocks this year after a spectacular run in 2018.
Despite these headwinds, Apple is up 32% in 2018, while Netflix, Amazon, and Google have risen 82%, 67%, and 11.3% respectively. However, Facebook’s shares have slipped by 7.6% this year.
Growth story far from over
While there might be a short-term correction in FAANG stocks it will also make them cheaper and more attractive.
Warren Buffett remains optimistic about Apple and has been increasing stake in the company for a few years now.
Apple and Google are targeting new business segments such as autonomous cars. Netflix, Amazon, and Facebook are already banking on the massive potential of emerging markets that open new regions to drive sales.
The FAANGs have massive cash balances that can be used for acquisitions as well as investments in research and development that will result in the product innovation and efficient services.
As long as the FAANGs continue to achieve substantial sales growth and successfully target new growth verticals, investors will remain bullish.
This Year’s Hottest Tech Stock Is Getting Crushed
Advanced Micro Devices [AMD] has been one of the top performing stocks for quite a while. This chip maker has been a money spinner for investors, gaining over 400% in the last 30 months.
The stock was up a mind-boggling 1850% between Nov. 2015 and Sep. 2018. However, AMD shares have declined close to 40% since the start of Oct. 2018, wiping out significant investor wealth.
So, does this mean AMD’s impressive stock rally has come to an end or is it another opportunity for investors to buy the stock? Despite the recent pullback, AMD is still one of the best performing tech stocks this year.
So why did AMD shares plummet?
AMD has been a Wall Street favorite for a while. So what has been behind AMD’s wild ride in 2018? Chip redesign efforts have benefited the company, driving shares to its 10-year high. The stock rallied close to 300% in the first nine months of 2018 and is now up 85%.
The primary catalyst of the sell-off has been weak third-quarter results for AMD. While sales rose 4% to $1.65B, it was marginally below analyst estimates. AMD forecast revenue of $1.45B for the fourth quarter, which was a bigger miss considering estimates.
The broader tech sell-off witnessed in Oct. also contributed to AMD’s price drop. This coupled with a bear run in the crypto market leading to decreased demand have contributed to a weak earnings forecast.
Chip revamp drove AMD to 10-year highs
AMD’s management oversaw the redesign of the company’s chip lineup and focused on improved product performance. There were encouraging reviews of AMD’s Ryzen chip for personal computers, Epyc chips for servers and Vega graphics chips.
Initially, sales rose 29% to $5.1B this year while net income rose to $299M, up from a net loss of $14M in the same period last year. However, a large part of this increase in sales was driven by the unsustainable boost in the crypto market.
With the crypto market declining 80%, this demand has also slumped for AMD chips that showed up in the company’s recent quarter. According to AMD, graphics sales in crypto mining accounted for 10% of sales in the third quarter of 2017. Comparatively, the crypto graphics vertical has contributed a negligible amount in Q3 2018.
Intel getting back in line
AMD’s rise in stock price was also driven by Intel’s CEO resignation in June 2018. Intel [INTC] has been struggling to revamp its manufacturing process for a while now. Earlier this year Intel also admitted that its much-awaited 10-nanometer chips will be available in large volumes by the end of 2019.
In fact, Intel’s 10-nanometer chips have been long delayed. The company was slated to launch them back in 2015. AMD’s shares spiraled upwards from $19 to $34 over the next few weeks post Intel’s announcement.
Investors expected this delay by Intel to drive incremental chip sales for AMD. However, Intel has now released information that it would launch chips that will be far ahead of competitor products.
Analysts believe AMD could not quite leverage Intel’s challenges to its benefit. In case Intel’s expected chip products make a strong comeback, AMD’s stock might decline further.
How do analysts view AMD?
The last time AMD’s stock rallied 1300% (between Oct. 02 and Mar. 06), the stock came crashing down and declined 96% over the next two and a half years. Piper Jaffray analyst, Craig Johnson stated, “History may not always repeat, but it does tend to rhyme…….These kind of parabolic advances really only end one way — poorly. From my perspective, I’m not chasing that stock here. I’ll wait for it to come to me.”
Some analysts believe the stock to be overvalued at current prices. It’s currently trading at 58x forward earnings way above the industry average of 14x. The 31 analysts tracking AMD, have an average 12-month price target of $24.17 for the stock. This indicates an upside potential of 27%.
CRYPTO EXPERT: Top-Ranked Crypto Currencies You Should Bet On This Year
In our previous post, we had seen that Marius Kramer outlined Binance Coin (or BNB) and Bitcoin as a safe bet in the crypto space. We also had a look at Kramer’s crypto portfolio allocation. Here, we look at cryptos that have the potential to replace Bitcoin.
According to Kramer, there are 6 primary blockchain characteristics required to replace Bitcoin. These include instant transactions, zero fees, scalability, decentralization, “Permissionlessness” and 1 millionth the energy usage of Bitcoin. The coins listed in this article have most of these characteristics and are in Kramer’s S-Tier (highly-ranked) category that includes Bitcoin.
The other cryptocurrencies in this category are Iota, Elastos, BAT, Enjin, Elixir, BNB and Dent. So if you have $10k to onvest, here’s how Kramer recommends allocating your investment in S-Tier coins.
Kramer states that though Bitcoin’s tech is pretty bad, it remains a top buy among institutional investors as it is still the most popular crypto. This might result in Bitcoin’s price rising to $50k in the near term. Bitcoin is down 8.7% in the last 12 months.
Iota is one of the two cryptos that fulfills the above 6 criteria. It also offers decentralized storage. According to Kramer, “There is a lot of criticism towards Iota because it currently uses a coordinator to verify transaction before there are more nodes on the network, at which point it can be removed, so it’s not that big of an issue.”
Iota has risen over 34% in the last year.
Elastos is the other crypto to fulfill the above 6 criteria and is the way ahead of currencies such as Stellar, NEO, and EOS as they are centralized.
Batcoin is a crypto with the most real-world traction. It has over 10M downloads in just over 4 months. This crypto has risen 33% in the last week and 80% in the last month.
Enjin Coin is a gaming coin with a network of 20M players and is integrated with the game Minecraft. This platform handles approximately 60M global views every month and accounts for sales of virtual goods worth amounting to millions of dollars. It is supported by a gaming-centric content management system and a dedicated e-commerce platform.
Elixir is a leading platform with a market cap of just over $1M as they have not yet done an ICO (initial coin offering). The cryptocurrency has slipped over 90% since January 2018 and is an attractive buy according to Kramer.
Elixir has slipped 43% in the last year.
Binance Coin is the fee token of Binance and Kramer states that this is the strongest coin in 2018. This crypto has slipped 6.6% in the last month but is up by a whopping 443% in the last year.
BNB is less volatile in a market downturn and is a good hedge against smaller Bitcoin crashes.
Dent has also gained significant traction in the crypto space with over 2M users sharing, buying and selling mobile data around the world. It is on track to replace M-pesa and is rising in popularity in Africa.
Weekly Roundup: Top 10 Stories This Week
Here are the top 10 highlights for this week.
1. REAL ESTATE: 20 Ways To Find Off-Market Deals
As the market heats up, it becomes more and more fashionable to find off-market deals.
But, not all “off-market” deals are worth buying. Even if 90% of off-market deals are a waste of time, that other 10% of the deals might sell well below market value, whereas anything listed online will definitely sell at market value. So, there is still some opportunity for money to be made. Here’s how.
2. 4 Smart Money Tips For The Holiday Season
With Thanksgiving break coming up, budgeting and planning your finances becomes vital. Here are some quick tips to help you make good financial decisions this festive season.
In order to avoid overspending this festive season, the best decision we can make is to plan ahead and make a budget. Here are 4 ways to plan your finances well.
3. If You Had Invested $1000 In Apple In 1980, Here’s How Much You’d Have Now
Apple – on Thursday – lost its $1 trillion valuation for a short time after its shares dropped 7% following a weak outlook. Fast forward to 2018, Apple in August became the first public U.S. company to hit a $1 trillion market cap. Apple’s journey, however, hasn’t been smooth. Here’s how much a $1000 investment in Apple in 1980 is worth today.
4. REIT Scorecard: Last Week’s Winners And Losers
With a difficult and dicey macro environment, how are REIT stocks faring? Are investors looking to diversify their portfolio and increase REIT investments in a volatile stock market environment? Here, we look at the top REIT gainers and losers over the last week.
5.Here’s How To Get A Mortgage You Can Actually Afford
Purchasing a home is exciting. After years of dreaming, you’re finally getting a place that you can call your own.
It’s really easy to get caught up in the excitement making you forget to ask one crucial question – how much “home” can you really afford? Here’s how you can get a mortgage you can actually afford.
6. INTERVIEW: Founder of $310M Clothing Line Bonobos On The Best Way To Raise Money (And No, It’s Not VC)
When Andy Dunn graduated from Stanford, the aspiring entrepreneur kickstarted a menswear company from his small apartment in New York. The clothing line, Bonobos, started off with a simple idea — selling chino pants.
7.“Pump and Dump”, Explained
Pump and dump is a form of securities fraud. It involves artificially inflating the price of a stock by false and misleading statements. Here an investor or a group of investors promote a stock they purchased at a low price. They manipulate the share price and drive it higher to book significant gains. Read more.
8.Bitcoin Expert: Bet Big On These Cryptos
Despite the volatility in the cryptocurrency space, Marius Kramer, a writer and influencer on cryptocurrencies, has been bullish about two cryptocurrencies in the current market. The crypto market is down by 80% this year and investors have burnt significant wealth. However, this seems the right time to re-enter or explore the crypto market once again as the time is ripe for the next bull run. Read more on which cryptos could face a surge.
9.Another Stock Market Crash Looming Ahead?
Unless you have been on a deserted island with no form of communication, you would know that there is a lot of scare mongering around the possibility of another stock market crash.
10.Here’s How Apple Can Clinch A $2T Market Value
On Aug. 2, 2018, Apple [AAPL] created history as it became the first company in the United States to be valued at $1T as per market cap. Apple’s market cap rose to a high of $1.10T and has since slipped to its current valuation of $996.3B. Despite the recent slide, Apple shares are up 25.5% in 2018. Now that it has crushed the $1T barrier, what’s next for the tech heavyweight? What will be the next revenue driver for Apple? Can the company be valued at $2T? Analysts definitely think so.