Should Yahoo Be Considered For The FANG Index?

• A few years ago, Jim Cramer coined the FANG acronym to refer to talk about the most popular stocks in the tech segment: Facebook Inc FB, Amazon.com, Inc. AMZN, Netflix, Inc. NFLX and Alphabet Inc GOOGL GOOG.
• These four stocks were among the most popular and best performing ones in 2015. Since the start of 2016, their returns have been less than satisfactory.
• Might it be time to consider adding Yahoo! Inc. YHOO to FANG, in an attempt to aid the performance of the group?

Year-to-date, the FANG trade has generated, in average, negative returns (about a 6.75 percent loss, imagining a portfolio where all stocks are weighed the same).

• Facebook’s stock gained 9.1 percent
• Amazon’s stock lost 18.3 percent
• Netflix’s stock tumbled 20.05 percent
• Google’s stock surged roughly 1.9 percent

Over the same time period, Yahoo’s stock lost about 14.4 percent.

Related Link: Forget The FANG Trade. What About GAFT?

In terms of fundamental performance – for the last reported quarter:

• Facebook delivered an earnings and revenue beat, including record profits. The stock gained about 16.5 percent since.
• Amazon posted a huge earnings miss and a slight revenue miss. The shares lost 5.3 percent since.
• Netflix reported a substantial earnings beat, despite a slight revenue miss. Shares have tumbled more than 12 percent since.
• Alphabet retrieved a very ample earnings and revenue beat. The stock was up more than 2 percent since the report.

Yahoo will report its fourth quarter financial results after the market closes on Tuesday. Ahead of the report, the Street is modeling consensus earnings of $0.12 per share (down 60 percent year-over-year) on revenue of $948.68 million – down 19.5 percent.

A few questions arise now: can Yahoo outperform expectations? Where will the stock go from now? Can it help the FANG trade?

Ultimately, some analysts see Yahoo as a “financial engineering play” and are betting on a sale. Maybe Tuesday’s earnings call will shed some light on the issue.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.