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How Long Can the FANGs Last?

The technology sector, which has led markets in recent years, has not been immune from the recent market drop, falling almost 10% in October. We have written about the outperformance of the FANG stocks (Facebook, Amazon, Netflix Google), stocks that have appealed to investors for being able to grow rapidly in a slowly growing economy. Investors have been, up until very recently, willing to pay ever higher premiums for shares of these companies.

That dynamic has at least paused, as investors are questioning if the companies can continue to grow at such a rapid pace. Amazon dropped 8% last Friday as third quarter revenue was below analysts’ expectations and the company predicted that fourth quarter results would not meet analysts’ projections. Additionally, the growth of Amazon’s international sales has slowed. All told, the stock has dropped about 21% from its September high. 

While no one doubts the power of the FANG stocks’ business models, assigning the right price to a business is never an easy endeavor. When, in Amazon’s case, the stock is priced very aggressively, at 132 times last year’s earnings, any misfires or missed expectations can lead to a rapid repricing by the market. 

 

DISCLAIMER: Past performance does not predict future results. This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.
Investment Advisory Team
Hefren-Tillotson

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Hefren-Tillotson Inc. is a leading diversified financial services firm providing investment and retirement plan management and comprehensive, financial planning through MASTERPLAN® for individuals and businesses. The firm’s wealth management services are administered by Certified Financial Planner (CFP) professionals, Chartered Financial Analyst (CFA) Charter holders, attorneys, Chartered Life Underwriters, and CPA/PFS’s. Hefren-Tillotson offers corporate services including 401(k) retirement planning, executive financial counseling, fiduciary reviews and workplace financial planning seminars. Founded in 1948, the firm is headquartered in Pittsburgh and has offices located in Pittsburgh, Butler, Greensburg, North Hills, and South Hills.