Based on the current economic climate where interest rates are increasing, there might be wisdom in the recommendation by Jefferies Global for Big Tech stock investors to focus their portfolio on acquiring MANG stocks instead of the infamous FAANG group.
FAANG which comprises Facebook, Apple, Amazon, Netflix and Google has been experiencing pandemic induced instability, along with base earnings that were also impacted, which makes it unlikely that their upcoming earnings will be satisfactory.
Sean Darby, an equity strategist for Jefferies noted on Tuesday that “One of the substitutions for the U.S Treasury trade has been to own the FAANG + M (Microsoft). It is a tad to early in our view.”
The yield on the Treasury note on Monday grazed 3% for the first time in almost 4 years and on Tuesday, was fluttering just underneath.
The FAANG group’s first quarter results have led to a lower rating for the S&P 500 – particularly due to Amazon and Netflix who had a significant decline after revealing their unsatisfactory first quarter estimates- leaving some wondering if they will still be pertinent in the future. This downtrend of FAANG+M has gone against the tide of the other stocks that had reported better than expected estimates.
The MANG portfolio which consists of Microsoft, Apple, Nvidia and Alphabet (Google) might prove to be a relatively better investment based on balance sheet, earnings and cash flow yields. While in reality, only Apple has slightly surpassed the S&P 500 on a comparative basis, and their shares have dropped by 10.3% for 2022, the wider market has declined by 12.3% in the same period.
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