The sell-off seen in the broader market since October is showing no signs of abatement. The Dow Jones Industrial Average and the S&P 500 Index are in the red for the year, while the tech-heavy Nasdaq Composite Index has lost over 11 percent from the year's closing high of 8,109.609 reached Aug. 29.
One of the worst affected sectors in the current market meltdown has been the tech sector, and blue-chip FAANG stocks have borne the brunt of the selling action.
Bears Come Calling
Barring Amazon.com, Inc. AMZN and Alphabet Inc GOOGLGOOG, the other FAANGs — namely Facebook, Inc. FB, Netflix, Inc. NFLX and Apple Inc. AAPL — are in bear territory.
A security is considered to be in a bear market if it has fallen by 20 percent or more from its recent high.
Notwithstanding the weakness seen since October, the FAANGs, with the exception of Facebook, are still higher for the year.
As of Nov. 6, here's how the FAANGs have fared in 2018:
- Facebook: Down 20.9 percent.
- Amazon: Up 42.7 percent.
- Apple: Up 4.8 percent.
- Netflix: Up 47.4 percent.
- Alphabet: Up 2.3 percent.
Time To Build Positions?
The FAANG group's influence on the broader market may be waning as the correlation between the two weakens.
"You're seeing a divergence in the FAANGs. Google and Facebook are starting to take on their own unique set of risk around privacy concerns that are driving performance, and if you look at Apple, Netflix and Amazon, they're starting to become more closely tied to the consumer," said Shawn Cruz, senior trading specialist at TD Ameritrade.
As a result, the FAANGs cannot drag the market collectively, Cruz said.
The pullback in the stock group presents a buying opportunity, in the view of some analysts.
"Maybe investors don't scoop it up with both hands, but they'll start dipping their toes back in the water. That'll be somewhere in the range they're at now," Cruz said.
Despite the near-term weakness, investors who took positions in FAANGs stocks five years ago would have seen their investments generate returns of at least 100 percent, Statista reported.
Infographic by Statista.
Although some FAANGs have had their own share of problems, such as privacy concerns at Facebook and sagging iPhone sales at Apple, the companies appear fundamentally sound.
They are leaders of the pack in the core areas in which they operate, and boast healthy balance sheets and impressive growth potential. The recent sell-off arguably served to normalize stretched valuations.
Net-net, it may not be time to give up on FAANGs stocks just yet.
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