Get Your FANGs into the Market
Dear Penny Stock Millionaire,
Yesterday, I discussed FANG stocks, what they are and the advantages of trading them. Today, I’m going to cover some of the various ways to invest in FANG stocks, but before I do, Let me repeat my disclaimer from yesterday, just in case you missed it.
I’m not an investor, and I’m in no way giving you financial advice. All trading and investing is risky. Never risk more than you can afford. Do your due diligence.
Alright, now that my legal team is appeased, lets jump into it!
The Best Way to Buy FANG Stocks
FANG stocks all trade on the Nasdaq exchange and are part of the S&P 500. Because of their high standing, any standard brokerage or IRA account will allow you to invest in a FANG stock.
Now, before you log into your brokerage account and blindly buy some FANG stocks, let me explain my favorite time to buy. Typically, these stocks move together in a group. And since they’re some of the hottest long-term stocks, they tend to trend upward endlessly.
That uptrend can be confusing and scary for investors — what if you purchase shares at the top? It can be smarter to wait… and wait… for bad news.
I know. It can be counterintuitive. But when FANG stocks have bad news, they pull back for several days or weeks. Or, if you look at 2018, several months. Bad news can allow you to buy shares cheaper. Or if you already have shares, you can add to your position.
Odds are, if you trade FANG stocks, you’re thinking many years into the future. So you might want to buy shares as cheaply as possible.
How to Short FANG Stocks
Unlike penny stocks, FANG stocks are extremely liquid. That means there are always shares available to short. Most of the time, the shares are easy to borrow, so there aren’t any additional fees to locate the shares.
Plus, some large companies offer put options to increase an investment’s leverage. So the question isn’t if you can short FANG stocks, but if you should.
Over the last decade, FANG stocks have been the strongest in the market. They haven’t been pumped up by chat rooms or promoters. There’s no dilution in their SEC filings.
As it currently stands, there’s no reason for these stocks to drop. That could change if the market shifts.
Is There a FANG Stock Bubble?
FANG stocks could be in a bubble. The thing with bubbles? Most people don’t know they’re there… until they pop.
Sometimes, assets rightfully increase in value. But the big question is whether FANG stocks have come too far too fast.
Earlier I mentioned the mind-boggling 700% return the FANG stocks gave investors from 2013 to August 2018.
And then … they pulled back. A lot of investors were scared the FANG bubble was about to burst. The stocks all pulled back 30%–40% in a matter of months. Facebook took an unusually large hit because of the data scandal.
The end of 2018 was a scary time for FANG investors. But these tech giants rebounded with a vengeance in 2019. The entire group rebounded off 2018 lows and provided investors with handsome returns throughout 2019.
Based on the price action of the FANG stocks, I don’t think they’re in a bubble. Again, I could be wrong. But if it was indeed a bubble, it should have burst when the FANG stocks plummeted in 2018. But they all bounced back to all-time highs within a year.
These are healthy, growing companies. There will be some volatility from companies that are still rapidly expanding. Unlike the dot-com bubble, there’s still plenty of money and room to expand here. Cloud computing, artificial intelligence, and big data are just a few areas that hold potential for even more enormous growth.
I see no reason to panic… yet.
FANG Stock Charts
Over the last two days, I’ve talked a lot about the impressive moves these stocks have made. Now that I’ve explained the fundamentals, I think it’s time to check out the daily charts over the last few years…
FB Daily Chart
FB daily chart — courtesy of StocksToTrade.com
AMZN Daily Chart
AMZN daily chart — courtesy of StocksToTrade.com
NFLX Daily Chart
NFLX daily chart — courtesy of StocksToTrade.com
GOOG Daily Chart
GOOG daily chart — courtesy of StocksToTrade.com
Looking at the daily charts over a 5–10 year period, its no wonder people think FANG is in a bubble. The 2018 pullback was the only period the stocks didn’t go up.
What to Expect From FANG Stocks in 2020
With all the FANG stocks at or near all-time highs, it’s hard to imagine the sector not continuing higher.
Take a look at AAPL, now part of the FAANG family…
AAPL Daily Chart
AAPL daily chart — courtesy of StocksToTrade.com
AAPL (and the rest of the group) experienced a healthy pullback in 2018, which primed it for its next leg higher. AAPL is now at all-time highs and trending nicely. Until some news or macro event stops it, there’s no reason for the trend to change.
FANG companies continue to innovate and expand. Their revenues continue to rise, and there’s plenty of room for them to continue growing. But with any investment, there are always risks.
The U.S. stock market has been on a 10-year bull run. This is the longest stretch in the history of the stock market. Although these companies experienced a healthy pullback, the overall market is overdue.
If the market enters a recession, the FANG stocks will likely go with it. To make matters worse, the world economy appears to be slowing. And a pullback is part of a normal market cycle.
You also have to factor in the continued drama with President Trump and his impeachment, however you feel about it. Will it affect the market? It very well could. No one knows how these events will play out — but you should be aware of anything that can affect stock prices and overall market sentiment.
The Bottom Line
Financial institutions want you to believe FANG stocks are the hottest thing in the market.
But that’s just not true. There are dozens of other sectors and industries that are growing faster than FANG stocks. Or that can offer better opportunities for traders with small accounts.
There’s plenty of risk with these high-growth companies. The financial networks just don’t think you’re smart enough to know anything other than what they try to spoon-feed you.
There are a lot of different ways to trade in the stock market. You don’t have to listen to the talking heads on TV. What you really need is to be a self-sufficient trader.
That’s exactly what I teach. And I’ll be the first to tell you — trading isn’t easy.
But it can be worth it.
Editor, Penny Stock Millionaires