Why FANG Stocks Are In A Bubble
Four of the most popular stocks of 2015 are off to a rough start in 2016, and one analyst thinks it's because they're in a bubble.
Sean Udall, the CIO of Quantum Trading Strategies, was a guest on Wednesday's of PreMarket Prep, where he continued his bearish sentiment on Facebook Inc (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN), Netflix, Inc. (NASDAQ: NFLX), and Google Inc (NASDAQ: GOOG). He even went so far as to say there could be a 15-25 percent drop in all four stocks over the quarter.
"This one is good old-fashioned fundamentals. It's a relative valuation issue...they just don't line up," he said.
Lack Of Growth
The main issue is the lack of growth among the tech giants.
"Amazon and Netflix aren't even growing that great. On a relative valuation basis you can find stocks growing three, four, five times more than the rate of Netflix," Udall said. "Google is only growing 2 percent year-over-year; It's not inspiring."
Related Link: Udall: Fitbit Could 'Annihilate The Quarter'
"I can find 50 companies growing far better than them," he added. "Maybe they're not quite as big as Google, but they're large-cap stocks. And Google is the cheapest of those four stocks."
The valuation on these four stocks, Udall thinks, is just way too high -- the result of investors descending into "looney land" towards the end of 2015.
"I think people have been conditioned to think that they can buy all these dips in FANG," he said. "At some point these 'buy the dip, hope for a bounce' trades in the FANG stocks just won't work. That will be I think where the real damage takes place."
Where To Buy
In particular Udall warned against Netflix and Amazon, where he doesn't see good support until $520. He claimed he'd probably be a buyer of Facebook, but wondered how much of that is already priced into the stock.
Listen to Sean's interview in its entirety below from 1:17:10 to 1:38:30, and catch PreMarket Prep live every morning from 8-9:35 here.
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