Welcome back to Mind Over Money. I’m Kevin Cook, your field guide and story teller for the fascinating arena of Behavioral Economics.
If you are an active investor, you are no doubt familiar with the acronym FANG, which stands for a group of stock market darlings that have come to symbolize this bull market’s “new economy” companies: Facebook, Amazon, Netflix (NASDAQ:NFLX), and Google.
The moniker was coined in 2013 by my friend Bob Lang, a great options traders and the “go-to” technical analysis pro for Jim Cramer’s Mad Money program. At the time, it was a handy way for him to describe the smoking-hot momentum stocks that every serious trader had to be on top of
But they became so much more than that in terms of each company’s economic impact. And yet some serious investors don't like FANG and what it stands for. I’ll explain with the short morning market note I wrote to Zacks followers on Monday September 11...
Tracking and trading the amazing "quad squad" FANG has been fun and very profitable ever since 2013.
But there's been a backlash lately. You hear a lot of investment pros throw FANG around in disdain, as if it's a mere momentum fad. There's one big problem with that view: at least three of those companies are extremely transformative to the 21st century economy. That's why I own Facebook (NASDAQ:FB) .
Own the Future By Owning the Sector with Teeth
And it's why I recommended long-term investors buy both Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL) under $750 each in June of 2016. So what you are really hearing when a pro dismisses the market rally with "Oh it's just being led by the FANG stocks again!" is "I missed that money train!"
It's much easier to dismiss FANG if you missed it, than to admit that these companies, and their hundreds of tech satellites and partners, are still creating the future of technology and commerce with their cloud, mobile, big data, and machine learning/AI strategies.
Bottom line: I say the current global technology expansion is a secular beast unto itself. Sure it will have hiccups and some demand limits will eventually hit semiconductor stocks. But for the next few quarters, don't be the investor who doesn't get the fortune-building opportunities in this crucial growth sector.
That was my short note this week on FANG which has become this extended monologue in Mind Over Money. I called them “extremely transformative” companies and technologies, but another way of describing them is to use the favorite and powerful adjective of Peter Diamandis and Steven Kotler: exponential.
I’ve talked often here about the two books written by this dynamic duo: Bold and Abundance.
By exponential, they mean when something changes an industry or an economy or the world by factors and orders of magnitude, compounded. That’s exponential impact!
Here are their 6 exponential technologies...
1. 3D printing
2. Infinite computing: think IBM (NYSE:IBM) super computers like Watson and other "big data" crunchers
3. Artificial intelligence: think NVIDIA (NASDAQ:NVDA) parallel processing chips that go in super computers, autonomous cars, and other "machines that can learn"
Regarding these first four, I wrote a special report in the spring of 2016 called Big Economic Disruption: Big Data, AI and Robotics and said that for investors facing a quickly-changing economic and technological landscape, they should simply buy Amazon, Google, Microsoft (NASDAQ:MSFT) , and IBM because these enterprises were certain to stay at the cutting edge of the disruption to come.
The other two exponential technologies are...
5. Networks and sensors
6. Synthetic biology
Now you probably laugh when someone says that Facebook is an exponential company changing the world. But by the definitions offered in Bold, it is because of the "6 Ds" of exponential technologies: Digitalization, Deception, Disruption, Demonetization, Dematerialization, and Democratization.
Steven Kotler says that 40 percent of today’s Fortune 500 companies will be gone in ten years. Products and services are being dematerialized and demonetized. The entrepreneurs who win are those who can think exponentially.
How is Facebook exponential then? I explain that and hint at what they are up to in their secret projects lab “Building 8” in the podcast.
I also share some special insight on market and technology cycles from my recent article 5 Secrets of This Bull Market.
And I read a great passage from Abundance about how the shift from "beer all day" to coffee culture helped ignite the Enlightenment.
Disclosure: I own Facebook shares for the Zacks TAZR Trader portfolio.
Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader service.
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