INVESTMENT EXTRA: Should you sink your teeth into the Faangs?

Spread the love

America’s Faang stocks – Facebook, Apple, Amazon, Netflix and Google’s parent Alphabet – have truly bitten investors over the past few weeks.

While the tech giants may have been some of the biggest contributors to US stock markets for the last decade, raking in huge returns for savers, their star status has slipped as their combined value is down more than $ 1trillion from highs reached earlier this year.

For anyone who scooped up shares in the companies when they were at their peak, this is bad news. 

Facebook has been damaged by the discovery of suspicious Russian activity on its site in the run-up to the 2016 US presidential elections

He points to the fact that companies like Netflix – which hasn’t released any specifically bad news – have fallen just as much.

‘It’s been a self-feeding process as people have piled in to the stocks because they have been going up,’ he says, adding that some fund managers bought, not because they particularly like the shares, but for fear of missing out on gains.

‘But this means that when there is the slightest hint that there might be clouds on the tech horizon, there are half-hearted stock holders who are keen to get out’, Stevenson says.

Park, too, concedes there are wider forces at play. Interest rates have remained low since the financial crisis. This has forced savers looking for a better return in riskier stocks like the Faangs.

Now, however, interest rates in the US have started to rise and are expected to continue going up.

This means some investors feel there will be less need to take on the extra risk of the Faangs to get good returns in future.

Despite the recent falls, many investment professionals see the Faangs as good long-term holdings because they are innovative and have huge potential to make profits in future.

Most brokers and online investment platforms do allow clients to buy stakes in companies across the pond, though it is more expensive than buying UK shares.

Hargreaves Lansdown, for example, takes between 0.25 per cent and 1 per cent of the investment to cover foreign exchange fees. 

But even though the Faangs are looking cheaper than they have for a long time, now may not be the time to plough money into them.

Chris Johnson of Johnson Research Group says: ‘We are sliding down a slope of hope. And we are looking for everybody to run to the streets and have the panic moment. I’m waiting for chaos before we start buying.’

For ordinary savers, the best way to play the tech game is probably through a fund or trust which has holdings in a range of companies.

Stevenson recommends the Scottish Mortgage Investment Trust or the F&C Investment Trust, both of whose shares trade on the London Stock Exchange.

Savers can also invest in open-ended funds such as the BNY Mellon Long-term Global Equity fund, Fidelity Global Special Situations or JPM US Select.

Leave a Reply

Your email address will not be published. Required fields are marked *