No Bite Without "FANGs"
Domestic stock market returns thus far in 2015 have been very misleading and in most cases, frustrating. Many investors are asking: The market is doing fine, why am I not? Unfortunately, “the market” is not doing fine. Four individual stocks are doing well but most other stocks are negative. In some cases, being disappointed with returns this year may mean that you are diversified and/or not willing to over pay for already expensive stocks.
Consider the group of stocks we call “The FANGs” (although securities industry regulators do not allow us to provide the names of individual stocks in a newsletter, here is a link to give you more info on "FANGS" http://www.visualcapitalist.com/the-market-has-no-bite-without-the-fang-stocks-chart/ ).
These 4 stocks are substantially positive year to date (+36%, +116%, +168%, & +46%). Most other US stocks are negative for the year. To drill a little deeper, consider that the 10 largest stocks in the S&P 500 are up 15% in 2015 while the other 490 are down 6%. There have been very few winners this year.
Some would ask, “Why don’t we just buy these 4 stocks?” Let’s look at the valuations of these 4 companies. They are not cheap. One currently has a P/E ratio of 970. This means that through earnings alone, it would take 970 years to recoup your original investment. That is a long time to wait. The other 3 have current P/Es of 107, 350 and 35. Long term, it is hardly ever a good idea to pay these prices for any stock.
It has been a frustrating year for many investors. We want to help you understand why what you hear and see in the media may be very misleading concerning the US market in 2015.
Mark Twain once said “If you don’t read the paper, you are uninformed. If you do read the paper, you are misinformed.” We don’t always like what the facts of the market tell us, but it is our job to keep you informed & to help you make the best financial decisions possible.
BOTTOM LINE: There are a couple of high flying stocks helping to prop up the U.S. market, amidst a slowing global economy. Don't get lulled into thinking that significant risks are not present because a few stocks are holding up market indices.
Feel free to contact us if you have questions or would like to discuss your specific portfolio. We appreciate the continued confidence and the opportunity to serve you & your family.
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