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Rekenthaler Report

Last Year Was Easy for Stock Investors

But this year is different ... right?

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Stocks That Bite
Beating the 2015 stock market required one good decision: Own the FANG stocks--the giant Internet companies of  Facebook (FB), (AMZN),  Netflix (NFLX), and  Google (GOOG). (Yes, I know, the latter should be Alphabet. I'm not ready to write that yet. Call me a traditionalist.) The FANG Four, as the quad is sometimes dubbed, nearly doubled in aggregate worth, as the rest of the stock market faltered. If you entered 2015 holding more FANG than others and avoided the temptation to take profits, you very likely outperformed. If you were FANGless, not so much.

This year, of course, is different. The profits have already been made with the FANG stocks. Realistically, how much more can they grow? Apple and Google are the planet’s two largest companies by market capitalization (perhaps the universe as well, but Morningstar research is insufficient for the task), at more than half a trillion dollars each. They won’t be doubling their worth again anytime soon. Amazon has never made as much as $1 billion in a fiscal year yet is valued at $300 billion. Even considering the company’s rapid top-line growth and its ability to transmute revenues into profits when it so chooses, that is an optimistic valuation.

John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.