In the month since Donald Trump was elected America’s 45th President, U.S. stock markets have been on a tear, with all three major indexes hitting new all-time highs. But not all stocks have been part of the rally, and the so-called FANG stocks were most noteworthy in their absence.
What are FANG stocks? They’re an acronym for Facebook (FB), Amazon.com (AMZN), Netflix (NFLX) and Google (GOOG)—four of the market’s greatest modern-day growth stocks. Coined by CNBC’s Jim Cramer, the FANG stocks hold plenty of sway in today’s stock market, particularly the Nasdaq. Similar to Apple (AAPL) a few years ago, as the FANG stocks go, oftentimes, so goes the market.
But not this time. When the Trump rally began in earnest the second week of November, the FANGs didn’t join the party. Just look at the disparity between the returns in the Nasdaq and each of the four FANG stocks from November 7 (the day before the presidential election) through November 25:
Only AMZN was in the red during that red-hot stretch, and that was after the stock nosedived from 787 to 719 in less than a week. FB and GOOGL were sluggish for much of November, and NFLX had a rare down month. The absence of the FANG stocks from the Trump rally gave many analysts—including our growth stock expert Mike Cintolo—pause about the sustainability of the rally. The lack of FANG participation in the run-up was evidence of a flimsy rally built on big gains in old-world sectors such as financials, energy and industrials, while growth sectors such as internet stocks, retail stocks and biotechs were getting crushed.
Here’s what Mike wrote to his Cabot Growth Investor subscribers on the last day of November:
“When looking at things from a bottoms-up (individual growth stocks) perspective, it’s clear the market isn’t making it easy on investors. Below the surface, we continue to see a tremendous amount of rotation and exaggerated moves. To this point, most of the strength has been focused in areas of little growth like banks, transports and some industrial-type stocks.
“But few growth stocks are participating, with most either trying to build new launching pads after a tough stretch in early November (many big-cap growth stocks fit into this category), or just meandering near their highs, waiting for buyers to arrive.”
Now, however, it appears that the FANGs are finally joining the rally. And that’s good news for growth stocks. Here’s what each of the four FANG stocks has done in the past few trading days:
FB: Bounced off 115 support on December 1 to as high as 118 on Monday
AMZN: Bounced off 740 support on December 2 to as high as 766 on Monday
NFLX: Inched its way from a low of 113 to as high as 120
GOOGL: Kited from a November 14 bottom of 753 to as high as 789
Okay, so that’s not a ton of evidence that the FANG stocks are officially back. None of them are currently trading above their 50-day moving averages, despite the recent mini-turnarounds.
But each of them is finally pointing up, which is something we haven’t been able to say for about six weeks. If they keep heading higher, it should bode well for the broad market—and growth stocks in particular—heading into the New Year.