Step Aside FAAMGs: Goldman Presents The "Future Five" Stocks That Will Define The Decade

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It appears that the market already had a sense that these "future five" would emerges as competitors to the FAAMGs, and an equal-weighted basket of the future five has returned 38% YTD compared with a 39% return for FAAMG. The future five have also had a 0.91 correlation with FAAMG YTD, meaning managers may view these stocks as a similar alternative to FAAMG ownership in the event that FAAMG’s large index weights and portfolio construction limitations have hindered their ability to own these stocks.

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So now you know what Goldman is pitching to its clients as the next FAAMG basket. What is unclear is whether Goldman's prop traders are already selling their accumulated holdings in this basket to clients, or if it is buying alongside them. Keeping an eye on the return of FAAMGs vs the "Future Five" will be an interesting exercise for the near future.

That said, keep in mind that this alternative basket is will work only so long as the deflationary conditions that boosted the original FAAMGs to all-time highs persist. If and when higher rates emerge, a process which according to the latest BofA fund manager survey will be catalyzed by a vaccine for COVID, inflation, or even higher debt levels...

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... the massively overbought tech sector will suffer and both "current" and "future" five baskets will tumble.

In fact, one can argue that in a world where taking the opposite side of hedge funds and high net worth clients has been the most successful strategy in the past decade, shorting these "future five" may be the best hedge to a second tech crash, which many are warning is inevitable.

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Moon Kil Woong 1 month ago Contributor's comment

LOL good luck with the vaccine. It will need to be treated like the flu and more effort and expediency should be spent on quick approval and development of therapeutics. Big pharmas want a vaccine because they know they will get a lot of money and nothing may come of it for a year or longer (maybe never). As for the future FAANG stocks (don't include Microsoft please) they are not as broad or as encompassing in tech as the current ones. They should do well but are more prone to technology displacement. I own one or more of these but would not switch unless you wish to replace Facebook with another stock.

I agree medical technology will continue to advance and play a bigger role in the economy. However, it is unclear which will dominate besides maybe ISRG who is the current leader. Even here, there will probably be many different surgical robotics doing different surgeries in the future.

Dick Kaplan 1 month ago Member's comment

The CDC Chief today said that a vaccine won't be widely available till 2nd or 3rd quarter of 2021.