Don’t Fight The FAANGs

Published on: 06/01/2021

In this edition of Chart Talk, Tony Ogorek and Jeff Viksjo discuss the big tech companies in the U.S.; Facebook, Apple, Amazon, Netflix, and Google (FAANGs).

TRANSCRIPT:

TONY:

Hi I’m Tony Ogorek, I’m here with portfolio manager Jeff Viksjo, and today we are discussing the wisdom of not fighting the FAANGs.  So Jeff, FAANGs, we’re not talking about dentistry here are we?

JEFF:

So Tony, FAANG is an acronym for Facebook, Apple, Amazon, Netflix, and Google, or in other words, the big tech companies in the U.S..

TONY:

Right, and you know sometimes it’s difficult to conceptualize just how big these are, how powerful these companies are.  We have a chart here, which I think gives us a little bit more perspective on how big these companies are.  So, what do we see here on this first chart Jeff?

JEFF:

So this is just showing what these tech giants earn, and by earn I mean sales, how much revenue they generate per minute.  And the leader of course is Amazon at $837,000, that’s about $1.2 billion a day in sales.

TONY:

Yeah that’s amazing.  That’s times 365 days a year.  These are just tremendous numbers. Now, that sort of begs the question, they’ve got a lot of revenue coming in, but really we want to know how profitable are they?  And for that we have another chart.

JEFF:

Yeah and this just shows the most profitable companies in the world.  The top two are Apple and Microsoft.  Alphabet, which is the parent company of Google, is not far down the list.  The only U.S. company that is not a FAANG that’s on the list, is JP Morgan.

TONY:

Right so, we hear from people that investing themes change over time; growth, value, small caps, whatever the case may be, foreign, but what we find is that these companies have such commanding positions that investing in them seems to be really a reasonably safe bet.  Because it’s exceedingly difficult, I mean Jeff, who is going to knock them off their perch?

JEFF:

Yeah they all have entrenched positions, it would be very difficult to even break them up from a regulatory standpoint.  They are earning all this money, they are pursuing these, they call them moon shots, in things like quantum computing, artificial intelligence.  Those things take a lot of money in research and development.  Who’s going to win that race?  It’s going to be these guys, because they have all the money to spend.

TONY:

So Jeff, in conclusion, this is why we think it is not advisable, really, to try and fight the FAANGs.  We think they are going to be here to stay.

Thank you for joining us. We hope you enjoyed this segment and we look forward to seeing you at our next Chart Talk.

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