As we look toward the beginning of another year, talk of acronyms such as FANG (Facebook, Amazon, Netflix Google/Alphabet) and FAANG (Facebook, Apple, Amazon, Netflix, Google/ Alphabet) continues. Analysts generally expect the FAANG stock performance to remain strong in early 2018, but not all of the stocks tend to be equal at this time of the year.
FAANG stock performance calculations indicate that Netflix, Inc. (NASDAQ:NFLX) and Facebook Inc (NASDAQ:FB) stock are usually the safest bets out of all the companies. However, you may be surprised to hear that insiders at some of the FAANG companies are cashing in on the strong gains posted this year.
Netflix leads in FAANG stock performance
CNBC calculated the FAANG stock performance for all five firms using data from analytics platform Kensho to estimate gains in each stock if shares were purchased on the last trading day of December in and then sold on the last trading day of January, stretching back to 2012. The results indicate that Netflix tends to have the strongest performance in he first month of the year, as the gains from this trading strategy indicate a significant outperformance for Netflix stock.
According to CNBC’s calculations of FAANG stock performance, Netflix stock bought at the end of the previous year and sold at the end of January averaged a return of 18.55% between 2012 and 2016. Facebook stock was in second place with an average return of 9.5%. Alphabet stock averaged a return of 2.92%, while Amazon stock averaged a gain of 0.73% in the first month of the year.
Apple stock was the only one of the FAANG group to average a loss during the first month with an average decline of 4.72%.
Why Netflix stock outperforms in the first month
Kensho data indicates that Netflix has beaten consensus estimates for the December quarter in each of years since 2012, which could be one reason the first month of the year has been historically kind to Netflix stock. One potential issue for the company this time around could be competition, however, according to GBH Insights analyst Daniel Ives.
Ever since Walt Disney’s deal to acquire Twenty-First Century Fox’s movie and film studios and entertainment assets, analysts have been speculating about the impact it could have on Netflix. It’s widely believed that if or when the transaction closes, Disney will pull all of Fox’s content off of Netflix—just as it has done with its own content.
Will Facebook stock beat Netflix this year?
In light of the concerns for Netflix about competition, investors who are studying the FAANG stock performance might think Facebook stock will do better in the first month of 2018. However, the social media firm does have its own set of issues.
This has been a difficult year for Facebook because of the Russian propaganda ad that was circulated on most social networks leading up to the 2016 presidential election. Many blame social media firms, especially Facebook, for allowing this to go on, and the issue of fake news complicates things even further.
he company has really focused on fighting fake news this year, and as a result, its operating expenses are expected to jump again in 2018. Facebook Chief Financial Officer David Wehner projects a 45% to 60% increase in expenses for original content investments and security.
Despite all the problems, Facebook’s user base continued to grow dramatically. Like Netflix stock, Facebook stock is also up by more than 50% year to date, and analysts don’t expect a slowdown anytime soon.
FAANG insiders are unloading shares
One bearish signal for upcoming FAANG stock performance is the fact that insiders at several of the companies have been unloading shares. Throughout most of this year, the FAANG stock performance has been off the chart, so it makes sense for insiders to take some profits, but MarketWatch picked up stock sales by top management of several of the firms recently.
For example, Mark Zuckerberg revealed recently that he plans to sell 35 million to 75 million shares of Facebook stock within the next 18 months, which would allow him to rake in between $6.1 billion and $13.1 billion for one of the largest insider stock sales ever, according to MarketWatch. He has also sold about $1 billion worth of Facebook stock in the last 18 months.
Jeff Bezos recently unloaded 1 million shares of Amazon stock, raking in approximately $1.1 billion. He sold another 1 million shares of Amazon stock in May.
Tim Cook’s sale of less than 270,000 shares of Apple stock pales in comparison to Zuckerberg’s and Bezos’ sales, but he still collected $43 million, according to regulatory filings. Last year, he sold another $65 million worth of Apple stock.
These aren’t the only insiders at the FAANG companies who are offloading shares of their companies, according to MarketWatch. In fact, there may be enough insider stock sales going on right now that it’s becoming time to be cautious.