Howard Marks on FANG stocks
Billionaire investor and co-founder of Oaktree Capital Management Howard Marks shared his latest views on FANG stocks, ETFs, and Bitcoin at the Delivering Alpha Conference on July 23.
Marks expressed his concern about high-growth technology stocks. He believes FANG stocks—Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL)—could mean more pain for investors since many ETFs have invested heavily in them, and these ETFs only focus on the “momentum” factor. According to Marks, ETFs’ continuous inflow into FANG stocks and the gradual new highs in these stocks make them riskier.
Marks said, “Yes. They are great companies, but ETFs may have accentuated the flow of capital into those stocks. Things that are most hyped … produce the most pain. A conspicuous number of ETFs are concentrated in the same stocks. When things go cold … who is going to buy it?” In the present investment world, ETFs are performing like “perpetual motion machines.” Their momentum strategy could be a major risk for the funds themselves as well as stocks.
FANG stocks have put on a great performance so far in this year and in the last nine years’ bull market. Facebook, Amazon, Netflix, and Alphabet gained 23.25%, 59.3%, 89%, and 21.1%, respectively, on a year-to-date basis as of July 25.
In the next part of this series, we’ll see why Facebook recorded it biggest decline on July 26.