The back story: The FANG stocks – Facebook (FB), Amazon.com (AMZN), Netflix (NFLX) and Google (technically, Alphabet Inc., GOOG) – have been crushing it this year. Turn that group into the FAAMG stocks – an acronym coined by Goldman Sachs to add Apple (AAPL) and Microsoft Corp. (MSFT) and drop Netflix – and you have the top five holdings of both the Standard & Poor’s 500 and the Nasdaq 100, which have accounted for more than a quarter of the S&P’s gains this year.
With that kind of performance and momentum, it’s hard to bet against those stocks.
Betting with them right now is equally hard.
Why I’m not buying them: One big tech name after another of the FANG is being pulled into the ongoing election scandal over Russia interference. It creates a very strange headline risk.
As a result, for anything but a day trade, I don’t want my money in them and I certainly don’t want my members’ money in them for risk-management purposes. On top of that, I think there are better trades to be made within the cyber security, precious metals, and energy sectors anyway.
What will make me buy them again: For anything beyond a day trade, it would be a resolution of the scandal/investigation. I get plenty of exposure to these names because I trade SPY calls and the FANG stocks make up more than 10 percent of the index, but I don’t need to give them any extra weight while they are in the news for the wrong reasons.
Davis Martin is the head trader at Dailyprofitmachine.com. He trades SPY calls and puts and swing trades individual stocks and stock options. At the time this article was published on RagingBull.com, he had no shares, options or open orders in any of the FANG or FAAMG stocks, though they were represented in the S&P 500 and therefore in the options he trades.