(co-authored with Jan Botha)
The S&P500 reached an all-time-high of 2550 points this month, a new peak for the five-year long equity bull market. The bull market has coincided with the rise of a new financial acronym, “the FANGs”.
It was around 15 years ago when the first acronym of this kind hit the wires. Jim O’Neill, former Goldman Sachs chairman, coined the acronym BRICs (Brazil, Russia, India and China). This was quickly followed by the PIIGS during the European debt crisis, the MINTs. Blame character-constrained online environments or millennials who spend all day on their cell phones and can’t be bothered to read or type things in full, but these acronyms have crept into everyday speech and, apparently, sell-side research.
The most recent acronym has zoomed in from a broader market allocation call to just four specific stocks. The term FANGs (Facebook, Amazon, Netflix, and Google) was popularised by CNBC’s Jim Cramer in early 2013. The combined market capitalisation of the FANGs is ~$1.7 trillion, about the same size as the combined GDP of Switzerland, Netherlands and Venezuela, or half the size of Germany’s GDP.
The FANG stocks have been the market leaders so far this year. Facebook, Amazon, Netflix, and Alphabet stocks are up about 50%, 32%, 60% and 25%, respectively, to the end of August. This against the S&P 500’s 16% rise. It also compares favourably against the South African market. This has become a trend and these stocks have outperformed for some time. The five-year performance composite relative to the market is illustrated below.
Stock price performance compared to JSE and S&P 500
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