The FAANG stock run isn’t done, this portfolio manager says

Richard Croft Think the FAANG stocks have finished their spectacular run? Don’t bet on it, says Richard Croft of RN Croft Financial Group, who contends that the tech giants won’t be stumbling any time soon.

The so-called FAANG stocks — Facebook, Amazon, Apple, Netflix and Google’s parent company, Alphabet — have been an unstoppable force for years now, with each of them easily posting double-digit (and in Netflix’s case, triple-digit) gains over the past 12-months.

Their looming presence over the markets is palpable. With a combined value of US$3.25 trillion dollars, the FAANG stocks currently make up more than 50 per cent of the market cap of the Nasdaq 100 Index.

But like any success story, the rise of FAANG has brought the doubters out of the woodwork, even more so in today’s investment climate where “anti-FAANG” portfolios are being offered as protection against the impending tech collapse.

One oft-stated claim is that even as the FAANG companies continue to post record earnings quarter after quarter, their likelihood of further growth diminishes as the size of these companies and their valuations grow.

“We have very small positions in Google and Facebook and many of the FAANGs,” says senior portfolio manager Walter Price of Allianz Technology Trust to CNBC, “because we think there are great opportunities elsewhere, and it’s really hard for us to rationalize a stock that’s worth US$500 billion to a trillion going up another 50 or 100 percent. I think that would be very improbable.”

Another source of discontent comes from the current geopolitical climate, where trade wars and privacy concerns are expected to, ultimately, pull the tech giants off their high horse.

But while tariffs and data privacy issues have affected the FAANGs, their impact has in many cases been vastly overstated, making some believe that investing in the FAANGs is a supremely risky venture. Croft disagrees.

“In our pool, we are writing calls against the FAANG stocks,” Croft told BNN Bloomberg Tuesday. “That’s actually been very good for us. The premiums are in the second quartile of option premiums out there, and the stocks have been on a very nice run.”

Croft says the evidence of a certain cageyness concerning FAANG comes out most clearly during earnings season, when investors start worrying about the tides turning against tech.

“All of [the FANG stocks] I like,” he says. “They’ve all got earnings coming up in the first three weeks of July, so we’re going to be interested to see.”