With the FANG stocks being so intertwined in so many funds, I get a nervous of the effect that they could have on the entire market if they crashed like they did during the .com bubble. Are my concerns justified?
With the FANG stocks being so intertwined in so many funds, I get a nervous of the effect that they could have on the entire market if they crashed like they did during the .com bubble. Are my concerns justified?
Funny you mention this. I am opening an investment account for my daughter and was looking at some mutual funds. Every time I click on the holdings of growth or a one fund or a go anywhere fund I see Apple as the top holding and google in the top 10. That being said Apple is about 5 percent or less in most of the funds so I don’t think it would be catastrophic if it dropped a lot. It is a top 10 holding in most of the funds I looked at but that is not really surprising. It’s valuation is not crazy like Amazon, it is growing it’s dividend and it does have good growth prospects going forward so it meets a lot of the criteria for a lot of different fund strategies.
Back when the dot com bubble popped, the PE of tech stocks was around 44, today it is around 25. Back then, tech companies where spending more than they take in. They weren't making a profit. Now, todays tech companies are printing money like it's going out of style and making profits. They have so much cash that they don't know what to do with it, so they are buying stock. Back then they where issuing stock like it was candy. Stocks like AMZN and NFLX are very expensive but they make tons of money. I think we are far way from the dotcom bubble.
As far as the affects of FANG on funds, FB and NFLX had a really bad stock reaction to their earnings a few days ago and the market barely blinked. Even when these FANG stocks are top holdings of these funds, they still only make up a small percentage of the total fund. If the FANG stocks crashed like what happened in the dotcom bubble, it would mean there are other problems in the economy. So over all there would be an issue but it would be everything.
They're eating the Penguins, they're eating the seals...
AAPL, whats a few more billion in marketcap when you're still cheap relative to peers?
And because of the good earnings, the market is just getting cheaper.
They're eating the Penguins, they're eating the seals...
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