FANG

Heresy! Goldman Says FANG “Mispriced”, Warns Of “Factormageddon”

"a group of five stocks which have been the key drivers of both the SPX & NDX returns year-to date. This outperformance, driven by secular growth and the death of the reflation narrative, has created positioning extremes, factor crowding and difficult-to-decipher risk narratives."

Uh-oh. Goldman has some bad news for a market that's depended on a handful of stocks for an outsized percentage of YTD returns. Here's the "shocking" headline: We and plenty of others have asked what would happen to this market if and when the stocks driving a quarter (or more, depending on what benchmark you're looking at) of the gains should roll over. That question is made even more important when you consider that hedge funds and large-cap mutual funds have overweighted a lot of these same companies in a farcical effort to best benchmarks by effectively levering up on the stocks driving benchmark returns ("stupid alpha"). Here's Goldman's take, in brief: Unintended Consequences of Outperformance. While FANG has dominated investor focus, the nature of the acronym has expanded more broadly to encompass mega-cap tech. Indeed, the bigger story in our view is FAAMG – Facebook, Amazon, Apple, Microsoft and Alphabet – a group of five stocks which have been the key drivers of both the SPX & NDX returns year-to date. This outperformance, driven by secular growth and the death of the reflation narrative, has created positioning extremes, factor crowding and difficult-to-
Subscribe or log in to read the rest of this content.

0 comments on “Heresy! Goldman Says FANG “Mispriced”, Warns Of “Factormageddon”

Speak your mind

This site uses Akismet to reduce spam. Learn how your comment data is processed.