The bull market got de-FAANGed on Wednesday as investors dumped shares of Facebook, Inc. (FB), Apple Inc. (AAPL), Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX) and Alphabet (GOOG, GOOGL) in an extremely volatile trading session.
But while some analysts are concerned that the dip could mark a turning point for tech, others say there’s no fundamental justification for such a sell-off in high-quality tech stocks.
All five FAANG stocks finished Wednesday’s session down at least 2 percent, with Netflix leading the way with a 5.5 percent decline. There was no clear reason for the sell-off, leaving investors to speculate as to whether it was simply a case of profit-taking in some of the hottest stocks of the year or a longer-term rotation out of technology stocks and into the retail and financial sectors.
“This is a massive rotation … out of FAANG and FAANG-related, out of cloud and into companies that benefit from tax reform,” CNBC analyst Jim Cramer says. “Where FAANG stops, nobody knows.”
Cramer says beaten-down domestic retailers such as Macy’s (M) and Target Corp. (TGT) will be huge winners from tax reform. Both stocks were up by more than 8 percent on Wednesday. Cramer says days like Wednesday are excellent examples of why long-term investors should always stay diversified.
Loup Ventures analyst Gene Munster says investors shouldn’t to get too worked up about short-term weakness in high-flying stocks such as Facebook.
“I think it’s understandable that this pullback is happening given investors are looking around and saying we’ve had a big run,” Munster said on CNBC. “I don’t think it changes some of the fundamental opportunities around some of these big tech names.”
The good news for investors is that the FAANG stocks all delivered solid fundamental numbers in the most recent quarter.
Kevin Caron, portfolio manager and co-founder of Washington Crossing Advisors, says FAANG stocks should be just fine as long as they continue to deliver the impressive growth numbers that have gotten them to this point.
“The overriding interest in the narrative has been this improvement in growth,” Caron said on CNBC. “So unless that growth looks threatened, then the market will move…
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