The tension between the federal government and Facebook and a change of leadership at Amazon have had little impact on the FAANG (Facebook, Amazon, Apple, Netflix, Google) stocks, which still offer good value but are starting to look expensive relative to the market, according to an Australian portfolio manager.
Tribeca Investment Partners portfolio manager Jun Bei Liu said while there was a widespread social response to Facebook removing Australian news from its pages, there has been little impact on the company via the stock market.
“People have been surprised by Facebook’s demonstration of its power and that attracted a consumer backlash, but there has not been a market response to these events,” Liu said.
“For Facebook, Australia is not a big market and their display of power has meant the largest focus on them has been by regulators,” she added, noting sentiment towards the FAANG stocks has been shifting for other reasons.
Both Facebook and Google have been involved in discussions with the government about signing on to a media code under which they will pay Australia news providers for content, while Amazon recently announced a new chief executive and Apple released a new range of computers using chips developed and produced in-house, instead of relying on third-party suppliers.
Liu said none of these changes has been viewed negatively and the share prices of each of the five companies is stable, based on the strength of their underlying businesses.
“The big shift is the global recovery is underway and more traditional investment sectors look like offering good growth so will be more attractive than the FAANG stocks,” she noted.
“These sectors will trade cheaper in comparison to FAANG stocks and as bond yields also start to move higher, FAANG stocks will become more expensive relative to the market.”
She said the stocks of these technology companies may also drop off in the short term as people emerge from lockdowns and move away from online experiences, and investors should be considering technology stocks that will retain the structural advantage they gained in the past year.
“Zoom is a stock that has benefited from lockdown as corporates did more meetings online than before COVID-19 and with the likelihood of less corporate travel there will still be plenty of opportunity for growth,” she noted.
She suggested investors looking for “exciting” technology investments may also want to consider e-gaming investments, noting an exchange-traded fund (ETF) providing access to the sector was launched in Australia late last year.
“E-gaming and e-sports was growing before COVID-19, but has now gone through the roof,” she said.
“We are seeing ETFs being offered for investors as well as growing interest in cryptocurrencies. Some of that is entering bubble territory, so people should still be cautious about what they enter into.”
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