Cheering For Daniel-San To Crane Kick The FAANGs

FAANG. What an acronym. A FAANG stock, cobra logo on its uniform, is like the antagonist in the classic 1984 movie The Karate Kid.

The FAANG (Facebook, Apple, Amazon, Netflix and Google-parent Alphabet) is unstoppable as he sweeps the leg and kicks the proverbial “value stock,” Daniel-san, in his broken ribs. No mercy. Miyagi, Daniel-san’s mentor, cannot help him.

At least that was the situation until a few months ago, when both Apple and Amazon reached valuations north of $1 trillion.

When I wrote about the top-heaviness of FAANG stocks in market capitalization-weighted indexes in 2018, these five stocks alone accounted for about one-eighth of the U.S. stock market. Since then they have been cracked, with Facebook and Apple taking the hardest hits.

Figure 1: Share Price Performance, 2018

Share Price Performance YTD 2018

 

Not many of us have issues with Netflix as an organization. But the other four FAANGs’ public reputations are on tenterhooks.

Amazon gives millions of small businesses sleepless nights, while its employees complain of poor working conditions. Want to talk about business risk? Wake up one morning to President Trump doing a Teddy Roosevelt trust-buster impersonation. You’re unstoppable until Daniel-san gets into the crane position.

Or look at the half-dozen reasons that reasonable people hate Facebook. One of them is probably our collective inability to prevent hundreds of images of our children from being plastered on its site, even if we are not “on Facebook.” If you don’t like it, tough luck. The BBC cites an Ofcom study finding that 70% of people do not think it is OK to share images of others without permission. It’s that other 30% that the rest of us have to worry about.

But there’s so much more.

Facebook is beset by accusations about "fake news" and political biases. Also, how about your high schooler’s shrinking attention span and growing self-doubt as friends post solely their life’s highlights? Stock market sentiment is a fragile thing: $379 billion is a lot to pay for a company that you and your next-door neighbor dislike.

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Duke Peters 8 months ago Member's comment

Great article on #FAANG. But if you've seen Cobra Kai, (and if you haven't, you must), you'll see that the antagonist in Karate Kid is not such a bad guy after all. And Daniel-san ain't so perfect!