415 Billion Ways FAANG Stocks Will Annihilate the Competition
We’ve got two months of good data on the recently launched FAANG ETF (FNG) — officially known as the AdvisorShares New Tech and Media ETF.
So let’s check under the hood.
FAANG, of course, is an acronym for Facebook, Apple, Amazon, Netflix and Google — easily the most disruptive fivesome of stocks on the planet.
To no one’s surprise, FNG is besting the S&P 500 since the ETF launched on July 14.
What is surprising, however, is the margin by which FNG is winning.
Quite frankly, it’s a slaughter.
In just over two months, FNG is ahead of the benchmark indexes by two full percentage points.
At such a frantic pace, FNG will crush the indexes by double digits in its first year of existence, which begs the following question…
Will FNG’s blitzkrieg persist into the foreseeable future?
I’ve got 415 billion reasons why the answer is an emphatic “YES!”
A quick peek inside the FAANG’s cash reserves shows that they’re flush with cash — $415.4 billion at last count. And they don’t intend to sit on it.
So I’m urging you to be ready!
The next few weeks will bear witness to a historic acquisition spree, as Facebook, Apple, Amazon, Netflix and Google position themselves for another banner year in 2018.
Of course, when a FAANG buyout offer is made public, the announcement stands to “break” the charts of certain tiny companies.
(The next chart to “break” could put upward of $100,048 into your pocket.)
With such a reality looming, investors need to know where the FAANG’s dollars will likely go.
Breaking Into the Film Industry
Facebook needs little introduction.
As the world’s largest social media company with a market value of just under half a trillion dollars, its impact on our lives is greater by the day.
And the fuel for Facebook’s unstoppable growth engine has been its relentless pursuit of acquisitions…
In its five short years as a public company, Facebook has acquired nearly 70 firms.
The list includes multibillion-dollar takeovers of Instagram, Oculus Rift and WhatsApp.
In fact, Facebook has spent more than $20 billion on takeovers since its founding in 2004, according to data from Column Five and Marketo.
With $35 billion in cash on hand to deploy, this trend won’t be coming to an end anytime soon.
Despite crossing the 2 billion user threshold, new user growth is slowing. And the company is running out of room to place its lucrative ads.
In other words, the social media giant needs to make a pivot to sustain its marketing clout.
To compensate for both declines, Facebook has its sights set on streaming video content.
This year, Facebook inked deals with millennial media companies BuzzFeed and Vox Media to license short-length content for an upcoming media channel.
But if it really wants to make a splash in media, here’s a company it might scoop up next: Lions Gate Entertainment Corp. (NYSE: LGF).
The $7 billion film company owns the rights to some of the biggest millennial movie hits of the decade: the Hunger Games and Divergent series.
And Lions Gate’s recent purchase of Starz added TV hits like Black Sails, Outlander and Powers to its arsenal.
Sure, buying a movie studio is a risky move for a tech company. But the benefits of owning its own big-name streaming content could pay fat dividends down the road.
(Speaking of payoffs… Lou just released a special broadcast where he reveals a “glitch” in the markets that unlocks regular stock windfalls approaching 1,000% or more… in just 24 hours. Click here to learn more.)
Amazon to Build a Cryptocurrency Roadmap
The rise of cryptocurrencies isn’t just driven by the privacy and freedom a decentralized currency provides.
As the world’s central banks cut interest rates below zero, cryptocurrencies provide a more reliable store of value than conventional money.
Among the FAANGs, Amazon has the most to gain — and the biggest need — to adapt its business practices to the rise of cryptocurrencies.
Indeed, while cryptos continue to gain traction, Amazon needs to dominate in this new space.
And it appears that the company is on track to do just that…
Amazon can use two means to grow its cryptocurrency presence.
For one, it can buy expertise from a similar business that has moved more quickly in the cryptocurrency arena.
The obvious buy is Overstock.com Inc. (NASDAQ: OSTK), another online retailer that’s a pioneer in the cryptocurrency business.
Overstock subsidiary Medici Ventures invests in cryptocurrencies and operates a trading platform.
Overstock recently rolled out a new platform for trading initial coin offering (ICO) tokens, fully compliant with SEC and FIRA requirements.
With a physical goods business compatible with Amazon’s cryptocurrency capabilities — and a current stock market valuation of under $1 billion — Overstock offers a highly attractive way for Amazon to build its crypto presence.
The other potential move for Amazon would be to acquire a direct holding in a widely traded (but cheap) cryptocurrency such as Dogecoin.
Dogecoin boasts 111 billion coins outstanding and a market value of only $126 million.
Amazon could then legally offer its Prime members the chance to buy Amazon goods using Dogecoin at an exchange rate of $1 = 1 DOGE.
That would transform the value of its DOGE holdings from their current $0.0011 per DOGE to almost $1.
(By the way, if you didn’t catch Louis’ special broadcast last week — where he shows how his chartbreaker strategy can put $100,048 in your pocket — click here now.)
Apple’s Next Step Toward Domination
Apple is no stranger to the record books.
It’s the largest company on record.
It reported the largest quarterly profit in history.
And most relevant to us, the company now boasts the largest cash balance on record — a staggering $261.5 billion.
Companies aren’t supposed to hoard cash, though, which I’m convinced sets the stage for Apple to break yet another record — the largest technology acquisition ever.
After all, the reality of being the world’s biggest technology company is that growth isn’t an option. It’s a requirement.
And the only way to keep growing at impressive double-digit rates is to make a big, bold move in the M&A department. Like acquiring one of its fellow FAANG counterparts — Netflix.
Doing so makes eminent sense, too. Here’s why…
As it stands, Apple can only rent or sell movies through iTunes. It does not offer a subscription service to stream, which impedes its growth. But by baking Netflix’s streaming video service into the 700 million-plus iPhones in use today, Apple would unlock a $68 billion profit center — almost overnight.
More importantly, the merging of their two “user bases” would create a devastating competitive advantage. (Netflix has over 100 million faithful users.) As a result, Apple wouldn’t just have a new space in which to operate — it would have a new space to dominate.
Now, Netflix already commands a hefty valuation, making it considerably more expensive than most of its competitors can afford.
At current prices, Netflix is valued at about $77 billion. Obviously, any takeover offer would have to come in higher. That would make any deal for the company the biggest technology acquisition of all time.
In case you’re wondering, the current record holder is Dell, which acquired EMC for $67 billion in 2015.
Now, in reality, the only company that can afford this crown jewel is Apple. CEO Tim Cook could make an offer at 3.5 times the current value of Netflix.
And with the proposed tax reforms from President Trump finally making their way to Congress, Apple may soon be able to “repatriate” the cash it’s holding overseas to fund such a historic deal. It’s only a matter of time, in my opinion.
When it comes to other cash-rich sectors like health care, time is not a luxury investors possess. Not if they want to capitalize on an opportunity for a 1,233% gain — practically overnight.
We’ll share more details in tomorrow’s column. But if you want to get a head start — and get your portfolio positioned in advance of the crowd, you need to check out the special Chartbreakers Profit event that is now live.
Ahead of the tape,
Chief Investment Strategist, Wall Street Daily