Wall Street’s FANG gang is growing again. Big money managers and other investors are again buying shares of Facebook, Amazon.com, Netflix, Google parent Alphabet and shares of other fast-growing companies, as the prospects of interest rates remaining low and a still-expanding U.S. economy have pushed investors back into one of the bull market's most profitable trades. The so-called FANG companies, as well as Apple and Microsoft, have gained $872.5 billion in market value so far this year, nearly recouping the $945 billion in losses those stocks suffered in a punishing fourth-quarter selloff. Their increase has contributed heavily to the S&P 500’s 14% gain since January. Unlike last year, when the quick rise of technology and other growth stocks spooked investors, several say conditions are ripe for these companies to run higher. They have still-attractive valuations, and the expectations are that many of those companies will continue to outgrow the broader market. “The climate couldn’t be any more different from last year,” said Denny Fish, a portfolio manager who co-manages Janus Henderson’s global technology fund. He is bullish on Netflix and maintains significant positions in Microsoft, Alphabet, Amazon and others. “Investors are now thinking through a more positive outcome, whether it’s China or the Fed,” Mr. Fish added, referring to investors’ expectations of a trade deal between the U.S. and China and the Fed’s more cautious stance. That has more fund managers crowding into those stocks. More than 180 fund managers overseeing $547 billion in assets said they considered the FANG stocks, as well as Baidu, Alibaba and Tencent, the second-most crowded trade in the market, behind shorting European equities, according to Bank of America Merrill Lynch’s April fund-manager survey, its highest ranking since the bank’s November survey. Although fund managers usually view overcrowding in tech as a drawback, a factor that was frequently cited in 2018 as a major risk to the stock market, some say this year's trade is less congested, leaving more room for further upside. Active fund managers, for example, had higher allocations to FANG stocks last month, compared with the fourth quarter, but allocations remained below levels seen over the last two years, Bank of America added in a separate report. How are you positioned in tech and internet stocks ahead of their earnings? Let the author know your thoughts at michael.wursthorn@wsj.com. Emailed comments may be edited before publication in future newsletters, and please make sure to include your name and location. |