FAANG vs. Meme Stocks — This Company Makes Comparison with its Portfolio Tool - Apple (NASDAQ:AAPL), AMC

Image by Gilly on Unsplash

Meme “Stonks” investing gained traction following the COVID-19-driven market pullback. Stocks such as AMC Entertainment Holdings Inc (NYSE:AMC), GameStop Corp. (NYSE:GME), Blackberry Ltd. (NYSE:BB) gained popularity after groups of retail investors piled up arguably the most shocking gains in the history of the stock market.

On the other hand, FAANG stocks — the 5 most popular and best-performing American technology company stocks including Meta Platforms, Inc. (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Apple, Inc. (NASDAQ:AAPL), Netflix, Inc. (NASDAQ:NFLX), and Google parent, Alphabet, Inc. (NASDAQ:GOOGL) have consistently been investor favorites.

With enough behavioral data on these stocks to put together a fair comparison from 2017 onwards, OVTLYR decided to create a portfolio of FAANG stocks and MEME stocks using its recently released portfolio solution.

For both portfolios the starting balance was set to $1 million with the “aggressive” risk tolerance selected. A pair of results for each portfolio — one evenly weighted buy & hold and the other using OVTLYR’s investor behavior data and active risk avoidance tech — are shown below:

Image: FAANG portfolio using OVTLYR tool

For a duration slightly under 5 years, the FAANG portfolio would have returned 220.69% with less than ½ the maximum drawdown incurred via buy & hold while staying in cash an average of 36.47% of the time.

Image: MEME Stock portfolio using OVTLYR tool

A buy & hold (or “diamond hands” if you prefer) approach to MEME stocks outperformed FAANG constituents over the same period given their meteoric appreciation. However, the key difference between “HODL” and utilizing OVTLYR’s model portfolio is risk control. Leading up to its incredible rally, these assets experienced severe drawdowns as they flirted with bankruptcy to varying degrees. OVTLYR’s risk mitigation allowed its version of the MEME portfolio to outperform buy & hold across core metrics, including absolute return, all while remaining in relatively safe cash positions nearly a third of the time.

To sum up the comparison, although the MEME stock portfolio outperformed FAANG stocks over the same period, it did so with considerably greater volatility. In either case, the OVTLYR versions managed risk more effectively, leading to better outcomes. If you are holding stock positions, you may need to consider the possibility of significant drawdowns and their impact on your portfolio. When leveraging behavioral data to your advantage, lessening the negative effects of such major swings is not out of the question.

OVTLYR recently added stocks like AMC Entertainment Holdings and GameStop Corp to their coverage list of over 1,650 available stocks. OVTLYR’s free pilot allows you to explore how behavioral data and unique model portfolio features that may help you cut through the noise in the stock market.

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. The content was purely for informational purposes only and not intended to be investing advice.

AAPLApple Inc

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AMCAMC Entertainment Holdings Inc

FBProShares S&P 500 Dynamic Buffer ETF

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GMEGameStop Corp