Charles Lewis Sizemore, CFA

About the Author Charles Lewis Sizemore, CFA

Charles Lewis Sizemore, CFA is the founder and principal of Sizemore Capital Management LLC, a registered investment advisor. Charles has been a repeat guest on CNBC, Bloomberg TV and Fox Business News, and has been quoted in Barron’s Magazine, The Wall Street Journal and The Washington Post. He is a contributor to Forbes Moneybuilder, and has been featured in numerous publications and well-reputed financial websites, including MarketWatch, SmarterAnalyst, TheStreet.com, InvestorPlace, GuruFocus, MSN Money, and Seeking Alpha. He is also the co-author, along with Douglas C. Robinson, of Boom or Bust: Understanding and Profiting from a Changing Consumer Economy (iUniverse, 2008). Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar. He also maintains the Chartered Financial Analyst (CFA) designation in good standing.

More Pain Could Be Coming for Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOGL)

Are the FAANGs holding up a weak market?


It remains to be seen whether the market is in the midst of a garden-variety 10% correction or if this is the start of a deeper bear market. But it does seem like this market is being held aloft buy a small handful of large-cap tech stocks: Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Alphabet Inc (NASDAQ:GOOGL) – the infamous FAANGs.

Let’s play with the numbers a little.

The S&P 500 cratered in early February but quickly rebounded, recouping about two thirds of its loss. And when the market rolled over again this month on trade fears, it stopped short of hitting new lows.

Data as of 3/26/2018. Past performance no guarantee of future results.

But stripping out tech and telecom stocks, we see a different picture. the S&P ex-Technology and Telecom Services Index fell in lockstep with the S&P 500, but the recovery was less robust. It recovered a little over half the prior losses. And when stocks dropped again in March, the ex-Tech and Telco fell to new lows.

Data as of 3/26/2018. Past performance no guarantee of future results.

Now, let me be clear that this is by no means a thorough analysis. This is a superficial first scan, and I plan to dig deeper this week.

Furthermore, the data as presented here doesn’t specifically isolate the impact of the FAANGs. The S&P 500 ex-Technology and Telecom Services index actually includes one of the FAANGs — high flier Amazon — which makes its performance look better than it should. It also excludes stodgy old telecoms like AT&T and Verizon, both of which have gotten obliterated this year as interest rates have risen… and which didn’t participate at all in the rally earlier this month. Excluding telco also makes the ex-tech index look better than it should.

I’ll dig deeper into the data later to build a true S&P 500 ex-FAANGs index, but this initial look would suggest that the this market is indeed narrow, being held aloft by Big Tech. That’s worrisome… and it makes me believe that more pain could be coming.

Disclosures: No positions in the stocks mentioned.