Tech Stocks: Time to Switch to TANG

Posted On April 17, 2018 2:05 pm

The term FANG has always been an acronym of convenience with some leeway about which tech stocks it should include. Sometimes it includes Nvida (NVDA) or Microsoft (MSFT) may step in for Netflix (NFLX) or Apple (AMZN) or Alibaba (BABA) replacing Amazon (AMZN) when the latter lags.

As it’s more of a concept than fixed set of stocks, I think it’s now time to replace Facebook (FB) with Twitter (TWTR) to create the TANG trade.

Over the past year well prior to Facebook’s Russia and privacy concerns, shares of Twitter had been outpacing those of Facebook, with the former up over 60% to the latter’s mere 10% gain over the past 12 months.

Despite Twitter having less than half as many users and not being nearly as profitable, the company has a much more important role and larger perceived role within the overall media landscape.  It is an indispensable tool for breaking and disseminating news.  Nearly every other piece of content, both live and recorded,  from sporting events, news article or comedy, uses or asks for Tweets to provide feedback via Twitter to enhance and supplement their content.  No says, “Facebook us @…”

And according to a recent article in the Wall Street Journal, Stock Pickers are Ready to Drop the F in FANG.

Some big investors are facing a moment of soul-searching about whether to abandon part of a long-profitable trade: a bet on a group of tech stocks known as “FANG.”

The stocks— Facebook Inc., FB +2.06% Amazon.com Inc., AMZN +3.12% Netflix Inc.NFLX +9.64% and Google-parent Alphabet Inc. GOOGL +3.45% —have long risen in lockstep and helped power the long-running market rally.

But since Facebook’s disclosure last month that millions of users’ data were compromised, stock-picking fund managers have soured on the social network’s shares, with some either partially or completely abandoning their investments.

While some money managers believe Facebook’s trouble threatens to cool user and revenue growth, many say the three other stocks remain among the market’s best bets.

Investors have been trying to lump these stocks all together for years” even though they have different business models, said Rob Sharps, head of investments and group chief investment officer at T. Rowe Price Group Inc. Now that Facebook’s struggles have come to light, “there may be some greater differences among the FANG stocks than in the past.”

Related: Here’s How You Should Handle Earnings Reports

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Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.

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