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As FAANG stocks falter, fund managers make bets on survivors

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NEW YORK (Reuters) – A bear market in the so-called FAANG stocks – Wall Street’s most popular trade going into the year – is pushing fund managers into searching for the next big growth companies that can lead the overall market higher.

FILE PHOTO: A trader works on the floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., December 4, 2018. REUTERS/Brendan McDermid/File Photo/File Photo

Shares of Facebook Inc (FB.O), Amazon.com Inc (AMZN.O), Apple Inc (AAPL.O), Netflix Inc (NFLX.O), and Google-parent Alphabet Inc (GOOGL.O) reached record highs in July.

Since then, problems ranging from Facebook’s data privacy scandals to Apple’s declining iPhone sales to Netflix’s rising cash burn rate have cratered the stocks, helping push the tech-heavy Nasdaq Composite index to the edge of a bear market. The Nasdaq lost another 1.7 percent in midday trading Friday.

With shares of the FAANGs down by an average of 25.6 percent since the start of the quarter, fund managers and analysts are starting to reconsider their approach to growth, treating the FAANG stocks less like a single bloc and more on their individual merits.

“This was a year when at the start of it you had to own the FAANG names and at the end of it you don’t want to own any of them,” said Kevin Landis, portfolio manager at the Firsthand Technology Opportunities fund.

Landis, who has been trimming his position in Apple yet still holds Amazon.com and Alphabet among his 10 largest positions, said that the FAANG group is breaking down as the companies mature and their growth plateaus.

As a result, he is trimming his position in Netflix and instead adding to his position in streaming television company Roku Inc (ROKU.O), which has a market value of approximately $3.3 billion, compared with Netflix’s market value of $116.3 billion.

“It’s hard to see Netflix growing here by an order of magnitude, but it’s easy to see Roku growing by an order of magnitude as the cord-cutting trend picks up steam,” he said.

FAANG FUNDAMENTALS

There are still things to like about each FAANG stock, of course. Netflix surprised analysts with its subscriber growth in its most recent quarter, for instance, while Facebook is continuing to grow quickly overseas and Amazon’s profitability came in higher than Wall Street had predicted.

Yet each company is also facing hurdles that belie the notion that they will continue to dominate the stock market. Netflix, for instance, is trying to weather a faster cash burn rate as the cost of content increases, while revenue growth for Google’s search and YouTube advertising is slowing amid stronger competition from Amazon.

Facebook is facing higher costs and greater regulatory scrutiny, while Apple grapples with a slower-growing market for smart phones and Amazon is weighed down by higher spending costs.

It’s been a “slow motion train wreck,” said Michael Pachter, an analyst at Wedbush Securities.

The steep slide in the stock market will likely break apart the popularity of investing in the stocks as a single trade, he said. “Facebook has almost daily scandals and Netflix has the impending loss of Disney/Fox content, but the others have really done nothing wrong at all,” he said.

Tom Plumb, portfolio manager of the Plumb Equity fund, said that he has largely stayed away from the crowded FAANG stock trade because of their high valuations. Yet of the group, he expects that Facebook is the least likely to rebound quickly, cracking the group further.

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“Companies  that have depended on the social media advertising are going to see some incredible regulatory scrutiny and I’d like to see a couple more quarters at least to see how they’ve adjusted their business models” before buying their shares, he said.

Instead, he is increasing his position in companies with strong recurring revenue streams such as Adobe Inc (ADBE.O), Visa Inc (V.N), and Microsoft Corp (MSFT.O).

“You don’t get to buy companies at panic prices unless there’s a panic, and I think there’s an incredible amount of anxiety in the market right now,” he said.

Reporting by David Randall; Editing by Jennifer Ablan and Nick Zieminski

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Independent Consultant Beginner – 6 Should Have Pieces Of It Technology And Software

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Prima Wireless Earbuds Reviewhttps://primawirelessearbuds.net/.

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What Make Sure You Really Know Right Anyone Decide To Travel

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When traveling with children advised plan your route in advance. Do a little research and see as relevant and fun places to stop such as parks, museums or other attractions. Once you take breaks every non-chemical hours so everyone maybe even including the children probably get out and stretch their legs.

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Majority of Canadian workers willing to take less pay for a workplace pension plan: survey

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A majority (70 per cent) of Canadians say they’re willing to forgo a higher salary in exchange for a workplace pension plan, according to a new survey for the Healthcare of Ontario Pension Plan by Abacus Data.

The survey, which polled more than 2,000 Canadian adults in April, signals an opportunity for employers to build back the post-coronavirus pandemic working landscape better by expanding access to good retirement plans — whether they’re defined benefit, defined contribution or group registered retirement savings plans, says Steven McCormick, senior vice-president of plan operations at the HOOPP.

According to the survey, a secure retirement remains of greater concern for Canadians than concerns about their health, debt load and job security. McCormick says this has been a consistent worry the HOOPP has seen in survey results over the past couple of years. Nearly half (48 per cent) of respondents said they’re very concerned about having enough money in retirement, while 31 per cent were highly concerned about their personal debt load and 26 per cent cited their job security. Close to half of respondents expressed high concerns for their physical (43 per cent) and mental (40 per cent) health.

In addition, the pandemic has harmed the finances of more than half (52 per cent) of Canadians’ surveyed and it’s had a particularly disproportionate affect on the finances of younger adults. Adults aged 44 and younger said they’re twice as likely (25 per cent) to have had their finances greatly harmed, compared to those over the age of 60 (12 per cent).

Generally, younger adults tend to work in roles that may have been impacted most by the pandemic, says McCormick, whether in service industries that were shut down or frontline health care that have been busy but don’t always come with access to a pension plan. “Affordability is an issue, so I think their worries increased during this time.”

And while almost half (46 per cent) of Canadians surveyed said they’ve saved more money than they would have since the onset of the pandemic, among these respondents, over half (52 per cent) didn’t put any of their savings toward their retirement. Overall, most (63 per cent) Canadians surveyed haven’t set aside or saved anything for retirement in the past year, a five-point increase since 2019.

McCormick says this may be due to uncertainty or hesitancy about whether people’s immediate needs outweigh longer-term needs. And with 55 per cent of respondents noting they were very concerned about the cost of day-to-day living, he adds that rising prices have fuelled insecurity and worries so people are creating their own emergency funds right now.

While there’s a segment of the population who’ve saved more and, for them, the pandemic has created wealth, he doesn’t see this as a common narrative in the survey data. “If you don’t have access to a workplace pension or the opportunity to have things like automatic enrolment, the uncertainty of the time may have you holding onto money,” says McCormick. “In Ontario, we’re more optimistic about the pandemic than we were maybe a month ago, but there are still people worrying about whether there’ll be a fourth wave.”

In addition, more than two-thirds (67 per cent) of respondents said a retirement crisis is looming and 65 per cent said saving for retirement is prohibitively expensive. It’s a common and shared dream for many people in looking forward to a secure retirement, says McCormick, noting for many, making that dream a reality remains elusive.

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