You won't hear many people bragging about owning FANG stocks in the S&P 500 anymore. And the reason is simple: They've already torn a trillion-dollar hole into their owners' portfolios.
All four FANG stocks, Meta Platforms, Amazon.com, Netflix and Alphabet, are crashing this year. And losses are hitting historic proportions. All told, the four former do-no-wrong stocks shed a collective $1.4 trillion in market value — just this year, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That, in effect, is akin to wiping out the entire value of Tesla and then some.
It gets worse. An equal-weighted index of the four FANG stocks is now down 39% this year and 34% over the past 12 months. FANG stocks are also only up 23% in the past three years. You know what that means? You would have been better off simply owning the SPDR S&P 500 ETF Trust not only this year, but over the past three. The S&P 500 is up 42% in the past three years.
"For years, a select group of megacap stocks propped up the market at large with huge outperformance and rising weightings," said Bespoke Investment Group. "In 2022, though, those same stocks are now a major index drag, accounting for more than half of year-to-date large cap declines."
S&P 500 Strikes Back On FANG
You might think short-term volatility is simply the price to pay owning FANG stocks. Maybe so, but now even the long-term outperformance is slipping away. And just owning the S&P 500 is looking more attractive than the FANG stocks now.
Over the past five years, the FANG equal-weight index is only up 93%. That's only marginally higher than the 79% gain of the S&P 500 in that time. But the pain is only intensifying. Shares of Amazon are down nearly 26% just this year. The company has erased north of $426 billion in market value following its disappointing first-quarter earnings release. That's the biggest drop in market value this year among all the FANG stocks.
And this is a major issue for investors. Still, with a market value of $1.3 trillion, Amazon remains the fourth most valuable stock in the S&P 500. And because of that, it's a top holding for many of the key mutual funds and ETFs most investors own. Giant Vanguard is the No. 2 largest owner of Amazon.com stock, after founder Jeff Bezos, with a 6.6% stake in the company.
FANGS Acting Like Penny Stocks
Investors who bought and held FANG stocks are paying the price. They aren't acting like safe big-caps at all.
Netflix is perhaps the best example. Shares of the online streaming company are down more than 68% this year. Losing two-thirds of your money on a stock isn't what you normally expect from an $84 billion company. It's important to point out, though, the company was worth nearly $267 billion just four months ago.
And it's important to note, too, the cliche of the "larger they are the harder they fall" also applies. Alphabet is "only" down 21% this year. But when you're talking about the S&P 500's third-most valuable company, worth $1.5 trillion, that's massive money getting wiped out. The value of Alphabet is down nearly $420 billion this year.
It's yet another reminder of how important it is to have sound sell rules. If you're not doing so, you're likely to get bitten.
FANG Stocks Bite Investors
| Company | Symbol | YTD % ch. | Market value lost ($ billions) |
|---|---|---|---|
| Meta Platforms | -40.4% | $393.1 | |
| Amazon.com | -25.5 | 427.0 | |
| Netflix | -68.4 | 182.3 | |
| Alphabet | -21.2 | 419.0 | |
| Total loss | $1,421 |
