The FAANG stocks may have had a good start to the year after getting pummeled last fall but there’s more upside to big tech, says Kim Bolton of Black Swan Dexteritas, who checks Alphabet (Alphabet Stock Quote, Chart NASDAQ:GOOGL) and Amazon (Amazon Stock Quote, Chart NASDAQ:AMZN) as two of his top picks for the next 12 months.
While none of the FAANG names have yet caught up with their highs set last summer before the big tech selloff that began in October, all five tech giants have been sparkling so far in 2019. Year-to-date, Alphabet is up 20 per cent, Amazon is up almost 26 per cent, Apple is up 29 per cent, Facebook is up 38 per cent and Netflix is up 41 per cent.
But the projections for growth in big data software and analytics are going to help drive the bottom lines of companies like Google and Amazon for years to come, says Bolton, president and portfolio manager at Black Swan, to BNN Bloomberg last Wednesday.
“Big data alone will represent about 30 per cent of all data stored in data centres by 2021 and that’s up from 18 per cent right now. So, it’s a huge growth area. And the likes of Amazon and Tencent and Baidu and Google are the cornerstones when it comes to data sources,” says Bolton.
“Google is a leader in [big data software] as a data source,” he says. “They’re one of the best-positioned companies when it comes to the secular trends within digital advertising but then they have a lot of other revenue streams that come out of the Google cloud or Google Play and their various subscriptions. I just think it’s a gem. It’s a hold in our portfolio and we actually have about five and a half per cent of our portfolio.”
“It’s actually decently priced because it’s got a [price/earnings to growth] ratio of 1.61,” he says.
Bolton also sees a long runway for Amazon and its Amazon Web Services.
“As everyone knows, they’re a big retail business and they’re primed for growth. They have this great money-making machine of AWS, which is the backbone of the Internet. It allows that money that they make over there to actually spread it around to other businesses that they get involved in,” Bolton says.
“Again, it’s not expensive. It’s got a PEG ratio of 1.78,” he says.
Bolton has a one-year price target of (US) $1350 for Alphabet and a target of $2125 for Amazon.
Disclosure: Cantech’s Nick Waddell owns shares of Amazon