Author — George Trager, Financial Markets Enthusiast, Editor of investbrain.net
he grouping of internet giants Facebook, Amazon, Netflix and Google, “FANG” as coined by Jim Cramer are amongst the most highly followed and analyzed companies. These stocks on average returned an enormous 83% in 2015, compared to a flattish market: Facebook returned +34%, Amazon +118%, Netflix +134% and Google +47%. What’s interesting to us are the hedge funds who own two or more of the FANG stocks and undoubtedly benefited in 2015 from the strong performances and perhaps might be feeling the opposite effect given the fact that these stocks are down an average of 20% year to date, approximate double the decline of the S&P 500.
Using third quarter filings made by major hedge funds, the above diagram details hedge fund ownership of the FANG stocks across 11 well known hedge funds. Some interesting takeaways: so far, we know that newly launched Melvin Capital was up around 40% heading into December 2015 while Viking Global Investors reportedly ended the year up “high single digits”. Heading into the fourth quarter Melvin’s FANG holdings (Facebook, Amazon and Google) made up 11% of its capital while for Viking Global Investors, their holdings in Amazon, Netflix and Google made up 14% of their capital (Viking’s stake in the three companies was worth $3.6 billion at the end the third quarter). On the other hand, as the Wall Street Journal reported last week Chase Coleman’s Tiger Global declined 14% in January. The declines make a lot of sense when you consider the fact that through the third quarter of 2015, the two FANG stocks the hedge fund owned, Netflix and Amazon made up 43% of its capital, and on average the stocks of Netflix and Amazon declined 16.5% in January (these stocks have gone on to decline a further 15% in February to date).
It won’t surprise anyone that many of these well-known hedge funds own the FANG stocks as long before the term was coined, these companies were the alleged secular winners (or category killers) in a number of enormous categories: television entertainment (Netflix), advertising (Google, Facebook) and retail (Amazon), categories which enumerate in the hundreds of billions. So the attraction is quite clear in addition to the fact that I’d be willing to guess that nobody has gotten fired for owning any of these stocks in the recent past. Although,if the current stock trends for FANG continues that could change rather quickly…..
ValueWalk's Raul Panganiban interviews Kirk Du Plessis, Founder and CEO of Option Alpha, and discuss Option Alpha and his general approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with Option Alpha's Kirk Du Plessis