It's time to look up the FAANG, according to a trade producer.
FAANG is an acronym for the five popular tech stocks – Facebook, Apple, Amazon, Netflix and Google – which have grown and dwarfed the competition for several years. The cart was originally called FANG, when CNBC's Jim Cramer made the term back on February 5, 2013. Apple was added by investors about two years later and formed the FAANG basket.
Fast forward three years to early to mid-2018, and the FAANG shares still dominated the stock market, to which investors piled, despite tight valuations. But in the second half of last year ̵
But the technological giants have begun to start this year, with Netflix leading the win, up 33%. Meanwhile, the alphabet (Google) has seen the least progress, up 7%.
"There is some divergence going on in this group," said Shawn Cruz, general manager of trading strategy at brokerage firm TD Ameritrade, Markets Insider told. "You have to distinguish between all the shares that fall into the same basket."
Cruz pointed to the stock's future price-to-earnings amount, or how much investors are willing to pay for $ 1 in the future, to show the divergence between tech titans. Usually, if investors are willing to pay more for a stock to get $ 1 of earnings, it means they think the company is less risky.
"The markets tell you that they think the earnings estimates assigned to Google, Facebook and Apple are much more risky than the earnings estimates assigned to Amazon and Netflix," Cruz.
The risk is related to the business model, he added. For example, Apple is already in the mature part of the business cycle, while Netflix is still in its early growth stage.
On Tuesday, Apple said in the current quarter that the revenue release that sales of The flagship iPhone went down 15% and that business continues to struggle in the coming months.
At the opposite end of the spectrum, Netflix said in its fourth quarter that it added 8.8 million paid subscribers globally, and topped Wall Street estimates at 7 $ 6 million Streaming giant expects to add 8.9 million paid international subscribers in the first quarter, well above the 8.5 million Wall Street consensus.
Don't say the group as a whole should move higher, "Cruz said. "Netflix and Amazon are now expected to lead the package."