Summary
I think, in light of Wednesday's events, it's time to take a step back and talk frankly about FAANG, tech, and "story" stocks more generally.
This has been a week during which Facebook, Twitter, Amazon, and Tesla were all hit hard and although there are idiosyncratic factors at play, there's a common thread.
Here's my sweeping take on the outlook for the names everyone has come to know and love (or hate, depending).
Going back to last summer (and really well before that, but I'm confining my frame of reference to the small window in time during which I've been writing under this pseudonym), I've variously suggested that folks should exercise a healthy degree of skepticism when it comes to the notion that we've all collectively identified the companies that are going to lead humanity into the future by remaining at the forefront of technological innovation.
Sure, it is likely that Amazon (AMZN), Apple (AAPL), Tesla (TSLA), Facebook (FB), Google (GOOGL) (NASDAQ:GOOG), and the rest of the usual suspects are here to stay and it is also likely (if a little less so) that those companies will indeed play an important role in the evolution of technology and thus in the continued advancement of humanity. That's assuming you equate technology with human advancement, which I think for our purposes here is OK to do.
But just because that's likely does not mean it is guaranteed. I'm going to quote Howard Marks for the umpteenth time this week because he said it best last year in a note that's looking more prescient by the day:
In the current iteration, these attributes are being applied to a small group of tech-based companies, which are typified by "the FAANGs": Facebook, Amazon, Apple, Netflix and Google. They all sport great business models and unchallenged leadership in their markets. Most importantly, they're viewed as having captured the future and thus as sure to be winners in the years to come.
True as far as it goes... just as it appeared to be true of the Nifty-Fifty in the 1960s, oil stocks in the '70s, disk drive companies in the '80s, and tech/media/telecom in the late '90s. But in each of those cases:
the environment changed in unforeseen ways,
it turned out that the newness of the business model had hidden its flaws,
competition arose,
excellence in the concept gave rise to weaknesses in execution, and/or
it was shown that even great fundamentals can become overpriced and thus give way to massive losses.
7 more pages....
http://seekingalpha.com/article/4159896-tell-story
Realist - Everybody in America is soft, and hates conflict. The cure for this, both in politics and social life, is the same -- hardihood. Give them raw truth.
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