FAANG stocks will have another banner year in 2018, Scotia Wealth manager says

Everyone knows that the FAANG stocks made incredible gains last year, but what’s in the cards for 2018?

With a recent dip in share prices and plenty of issues to deal with, some may be thinking that FAANG’s fortunes are shifting. Relax, says Mike Newton, wealth management director at Scotia Wealth Management, it’s just the new year’s jitters.

For Facebook, Amazon, Netflix and Google (The FANG of the FAANG group), the past year has been particularly sweet. All four companies posted well over 30 per cent gains in 2017 and all of them saw share prices reach new all-time highs in early January.

But a little bit of a downward trend this past week seems to be giving cause for concern that the shine might be coming off the FAANG stocks, not to mention the fact that social and legal issues are now bedevilling the tech giants like never before. Google, for one, lost an antitrust case in Europe this past year and now has the EU intent on taking more action tout de suite. Meanwhile, Facebook continues to grapple with its social media growing pains, including fake news concerns and a public increasingly ill-at-ease with their own addiction to smartphones.

Facebook’s share price took a major hit this past week after the company announced changes to its news feed, with CEO Mark Zuckerberg implying that Facebook needs to own up to being a socially responsible business. “One of our big focus areas for 2018 is making sure the time we all spend on Facebook is time well spent,” said Zuckerberg. In response, shares in Facebook dropped 4.5 per cent last Friday.

Are we in for a rough year for the tech stock darlings? Not likely, says Newton, who contends that the upcoming year will be just as rosy for FAANG stocks as 2018, and he chalks up the worrying to a general tendency to want to shake things up at the start of a new year.

“When the calendar changes, people start thinking that they have to change something,” says Newton, in conversation with BNN’s Michael Hainsworth. “I still think they’re great and I still own them all. Until the trend changes, for real, I’m going to continue to own them. It’s that simple.”

According to Newton, one of the knee-jerk reactions he’s seen is people looking to commodities, perennial under-performers over recent years, as the potential new hope.

“What I’m hearing from everyone in Canada and everywhere around the world is, ‘Commodities are popping up!’” Newton says. “There’s a weird thing that happens at the beginning of the year. People want to reposition into the dogs, into the things that haven’t done well, and the excuse is, ‘The market is expensive and I’ve gotta find some inexpensive things.’”

“But I think [FAANG stocks] are going to be fine over the next twelve months,” he says. “In fact, there’s no reason to believe, with the runway I see in front, that they don’t do exactly as they did in 2017. So, sit tight and don’t overthink it.”

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