I looked back at some lines in the sand I drew for FANG stocks back in August just days before the August decline in an article titled Shorting FANG at $1Trillion and like always I set up a portfolio that day recording prices where I could have easily put on a position.
The portfolio looked like this:
Short FaceBook (FB) @$92 Current Price $95 Flat
Short Amazon (AMZN) @$532 Current Price $610 Loser
Short Netflix (NFLX) @$124 Current Price $113 Small winner
Short Google (GOOG) @$656 Current Price $724 Loser
Shorting FANG is a Net Loser
Now keep in mind all of these theoretical positions were winners a few days after the August sell off, but when the markets turned higher everyone scrambled for upside beta and jumped back into the FANG trade into year end. I found it interesting that even after the early 2016 sell off these positions were still a net loser. It shows how professional traders will run up beta stocks and how technology stocks in favor are impossible to short no matter how good your timing.
Shorting FANG in any market cycle is dangerous. That is what I learned from this exercise. I will keep this portfolio active because it is a good measuring stick for me to determine the value of FANG, and it will help me understand when the current market beta stocks are over or undervalued. It also keeps me current on how much volatility we have in this group.
Know also that the retail public cannot trade these stocks - they are too expensive. These are professional traders picking each others pockets. Some portion of retail investors own (mostly 401-k) FaceBook shares, but primarily if retail is long technology it is invested in Apple (AAPL) which is in major sell of mode, and is not part of the FANG trade benchmark - exactly for that reason.
The question for me is this? When Apple sells off and retail gets out is it a buy? I think the answer to that question is a resounding yes !!
Know that a few years back Apple was a Computer maker who thought they might be able to make a few dollars in the phone business...having said that...take a look around and count the iPhones.
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