FAANG

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Mcgrass
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FAANG

Post by Mcgrass » Wed Dec 19, 2018 1:55 pm

They did so well then tanked for reasons beyond me. I didn't sell all of them and they continued to fall. Now they seem like screaming bargains to me, but the rest of the world doesn't agree. I plan to just hold what I've got on the premise that they'll eventually return to their highs over the next few years. What are other people doing?

Thegame14
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Re: FAANG

Post by Thegame14 » Wed Dec 19, 2018 1:59 pm

I haven't held an individual stock since I sold apply at $125 4 years (bought it at $89) ago to pay for my last semester of my MBA, instead of taking out loans. I am however very tempted to buy shares of Apple if they dip under $160, I don't see it going any lower than $150 if we have another big down day for the overall market. Their main issues is slow sales on new iphones, but that is because the Xs is over $1,000 and they have crappy trade in promotions. All they would have to do is announce a price drop or better trade in promotion and people would trade up and their sales would go up. I think they finally realized that iphones due have some price elasticity.

Cycle
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Re: FAANG

Post by Cycle » Wed Dec 19, 2018 2:15 pm

They do seem like bargains, unfortunately I have in my IPS not to buy individual stocks so my hands are tied and I can't take advantage of this opportunity.

I could revise my IPS, but then I'd have to write a rationale in the revisions section and I'm just too lazy to do that.
Never look back unless you are planning to go that way

bradpevans
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Re: FAANG

Post by bradpevans » Wed Dec 19, 2018 2:57 pm

Mcgrass wrote:
Wed Dec 19, 2018 1:55 pm
They did so well then tanked for reasons beyond me. I didn't sell all of them and they continued to fall. Now they seem like screaming bargains to me, but the rest of the world doesn't agree. I plan to just hold what I've got on the premise that they'll eventually return to their highs over the next few years. What are other people doing?
first question - what made you buy in the first place? Is that still true?
comment: many (most?) on this board see "too much risk" in individual stocks
second question: do these FAANG stocks have specific issues (like FB privacy concerns) or macro concerns? (like world economy slowing / like "everyone already has an iphone")

When it comes to stocks, it probably a pretty high certainty that all five of these will come back to new highs...
a) but when
b) will others gain (%) much faster

if you knew a) and b)....

ge1
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Re: FAANG

Post by ge1 » Wed Dec 19, 2018 3:00 pm

Mcgrass wrote:
Wed Dec 19, 2018 1:55 pm
They did so well then tanked for reasons beyond me. I didn't sell all of them and they continued to fall. Now they seem like screaming bargains to me, but the rest of the world doesn't agree. I plan to just hold what I've got on the premise that they'll eventually return to their highs over the next few years. What are other people doing?
I bought put options on Netflix when they were @ 400 which I since sold. I don't follow the other ones, but Netflix is anything but a screaming bargain, even at this level. Have you looked at their free cash flow?

livesoft
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Re: FAANG

Post by livesoft » Wed Dec 19, 2018 3:03 pm

Unknown reasons? Some of them are practically unindicted co-conspirators in recent news. :)
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David Jay
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Re: FAANG

Post by David Jay » Wed Dec 19, 2018 3:12 pm

Cycle wrote:
Wed Dec 19, 2018 2:15 pm
They do seem like bargains, unfortunately I have in my IPS not to buy individual stocks so my hands are tied and I can't take advantage of this opportunity.

I could revise my IPS, but then I'd have to write a rationale in the revisions section and I'm just too lazy to do that.
cute...

Actually, I kind of like the idea of a mandatory revisions section. No changes unless you can put down on paper why you are making the change.

I find that most of my brilliant ideas don't look quite so good after I put them down on paper. :(
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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mhadden1
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Re: FAANG

Post by mhadden1 » Wed Dec 19, 2018 3:21 pm

livesoft wrote:
Wed Dec 19, 2018 3:03 pm
Unknown reasons? Some of them are practically unindicted co-conspirators in recent news. :)
That's a big bad thing about single stocks - one earnings report, one news cycle can be enough to ruin everything.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

Cycle
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Re: FAANG

Post by Cycle » Wed Dec 19, 2018 4:42 pm

David Jay wrote:
Wed Dec 19, 2018 3:12 pm
Cycle wrote:
Wed Dec 19, 2018 2:15 pm
They do seem like bargains, unfortunately I have in my IPS not to buy individual stocks so my hands are tied and I can't take advantage of this opportunity.

I could revise my IPS, but then I'd have to write a rationale in the revisions section and I'm just too lazy to do that.
cute...

Actually, I kind of like the idea of a mandatory revisions section. No changes unless you can put down on paper why you are making the change.

I find that most of my brilliant ideas don't look quite so good after I put them down on paper. :(
Treat your investing like a business, not a casino.

Any major investment or change in business is justified by data or testing or a position paper. Successful businesses won't just hold their finger to the wind when their companys future is on the line.
Never look back unless you are planning to go that way

gluskap
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Re: FAANG

Post by gluskap » Wed Dec 19, 2018 4:53 pm

FAANG is already a large part of the holdings of VTSAX. I'm not sure I want to increase my risk by buying even more. It's like timing the market, yeah they will probably go up eventually but what if they continue to go down more before they go back up? Or what if they stay flat for a few years before going back up again? I'd rather just stick to being diversified and holding the whole market and not worry about figuring out the best time to buy and sell individual stocks.

KyleAAA
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Re: FAANG

Post by KyleAAA » Wed Dec 19, 2018 5:07 pm

A few of them seem undervalued to me, but I hold enough of a hot tech stock through my employer so I will avoid buying more. Google and FB in particular seem cheap but the rest are probably fairly priced as well.

KlangFool
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Re: FAANG

Post by KlangFool » Wed Dec 19, 2018 5:14 pm

Folks,

Why would you put any money into those individual stocks when you know that they have no possibility of going up 10X to 30X over the next few years?

A) I only put my "play money" into individual stocks.

B) I only gamble on individual stocks that have the possibility of going up 10X to 30X.

KlangFool

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Re: FAANG

Post by KyleAAA » Wed Dec 19, 2018 5:17 pm

KlangFool wrote:
Wed Dec 19, 2018 5:14 pm
Folks,

Why would you put any money into those individual stocks when you know that they have no possibility of going up 10X to 30X over the next few years?

A) I only put my "play money" into individual stocks.

B) I only gamble on individual stocks that have the possibility of going up 10X to 30X.

KlangFool
Because they are dominant in their industries and tend to have amazing profitability minus Amazon and Netflix. There are risks, but 20-30% returns going forward are also realistic. I also wouldn’t count Amazon our specifically in terms of 10x potential.

KlangFool
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Re: FAANG

Post by KlangFool » Wed Dec 19, 2018 5:22 pm

KyleAAA wrote:
Wed Dec 19, 2018 5:17 pm
KlangFool wrote:
Wed Dec 19, 2018 5:14 pm
Folks,

Why would you put any money into those individual stocks when you know that they have no possibility of going up 10X to 30X over the next few years?

A) I only put my "play money" into individual stocks.

B) I only gamble on individual stocks that have the possibility of going up 10X to 30X.

KlangFool
Because they are dominant in their industries and tend to have amazing profitability minus Amazon and Netflix. There are risks, but 20-30% returns going forward are also realistic.
KyleAAA,

1) Why would you gamble your money on individual stocks that could only return 20% to 30%? I won't. It is not worth the gamble.

2) How much of your portfolio would you put on those stock?

A) If you put too little, it won't matter a bit. Why gamble when it does not matter.

B) If you put too much, you are taking too much risk and too little return.

KlangFool

quantAndHold
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Re: FAANG

Post by quantAndHold » Wed Dec 19, 2018 5:46 pm

3 of these companies have market caps above $700B, one is at $300B, and the tiny one is at $100B. All of them are already dominant players globally in their respective markets. The bulk of their growth will have to come from new products, not from expanding the market for their existing products. That carries some risk. Once a company gets that big, 20-30% growth, year after year after year, gets pretty hard. They are also very well known, heavily followed companies, so it’s not likely that you know more about them than any other investor.

TL;DR - they seem fairly priced to me.
Yes, I’m really that pedantic.

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Re: FAANG

Post by KyleAAA » Wed Dec 19, 2018 5:49 pm

quantAndHold wrote:
Wed Dec 19, 2018 5:46 pm
3 of these companies have market caps above $700B, one is at $300B, and the tiny one is at $100B. All of them are already dominant players globally in their respective markets. The bulk of their growth will have to come from new products, not from expanding the market for their existing products. That carries some risk. Once a company gets that big, 20-30% growth, year after year after year, gets pretty hard. They are also very well known, heavily followed companies, so it’s not likely that you know more about them than any other investor.

TL;DR - they seem fairly priced to me.
False. Amazon in particular can grow 30% for a decade without entering any new markets. The cloud TAM is just that big, and they have the additional option of tapping adjacent SaaS markets. Their TAM is literally trillions of dollars at present. Microsoft can as well. Google and Apple won’t be able to.

KlangFool
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Re: FAANG

Post by KlangFool » Wed Dec 19, 2018 5:54 pm

KyleAAA wrote:
Wed Dec 19, 2018 5:49 pm
quantAndHold wrote:
Wed Dec 19, 2018 5:46 pm
3 of these companies have market caps above $700B, one is at $300B, and the tiny one is at $100B. All of them are already dominant players globally in their respective markets. The bulk of their growth will have to come from new products, not from expanding the market for their existing products. That carries some risk. Once a company gets that big, 20-30% growth, year after year after year, gets pretty hard. They are also very well known, heavily followed companies, so it’s not likely that you know more about them than any other investor.

TL;DR - they seem fairly priced to me.
False. Amazon in particular can grow 30% for a decade without entering any new markets. The cloud TAM is just that big, and they have the additional option of tapping adjacent SaaS markets. Their TAM is literally trillions of dollars at present.
KyleAAA,

Let's assume that it is true, so what? It may not drive the stock price up. It is built into the current Amazon's stock price. Amazon has to beat the expectation in order to drive up the stock price. Amazon's PE ratio is above 83 now. In fact, if Amazon only grows 30% per year, the stock price will go down. It is below expectation.

KlangFool

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Re: FAANG

Post by oldcomputerguy » Wed Dec 19, 2018 6:00 pm

Mcgrass wrote:
Wed Dec 19, 2018 1:55 pm
They did so well then tanked for reasons beyond me. I didn't sell all of them and they continued to fall. Now they seem like screaming bargains to me, but the rest of the world doesn't agree. I plan to just hold what I've got on the premise that they'll eventually return to their highs over the next few years. What are other people doing?
Holding Total Stock index funds. Will likely rebalance into them soon; certainly will, if things keep going as they are now. The only individual stocks we hold are shares of a couple of companies' stock that DW inherited from her mom (that together make up about 2% of our portfolio and that DW is holding for sentimental reasons).
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)

KyleAAA
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Re: FAANG

Post by KyleAAA » Wed Dec 19, 2018 6:13 pm

KlangFool wrote:
Wed Dec 19, 2018 5:54 pm
KyleAAA wrote:
Wed Dec 19, 2018 5:49 pm
quantAndHold wrote:
Wed Dec 19, 2018 5:46 pm
3 of these companies have market caps above $700B, one is at $300B, and the tiny one is at $100B. All of them are already dominant players globally in their respective markets. The bulk of their growth will have to come from new products, not from expanding the market for their existing products. That carries some risk. Once a company gets that big, 20-30% growth, year after year after year, gets pretty hard. They are also very well known, heavily followed companies, so it’s not likely that you know more about them than any other investor.

TL;DR - they seem fairly priced to me.
False. Amazon in particular can grow 30% for a decade without entering any new markets. The cloud TAM is just that big, and they have the additional option of tapping adjacent SaaS markets. Their TAM is literally trillions of dollars at present.
KyleAAA,

Let's assume that it is true, so what? It may not drive the stock price up. It is built into the current Amazon's stock price. Amazon has to beat the expectation in order to drive up the stock price. Amazon's PE ratio is above 83 now. In fact, if Amazon only grows 30% per year, the stock price will go down. It is below expectation.

KlangFool
It is not built into the current stock price. I was referring to the stock price with the 30% number. Earnings can grow much faster without entering new markets.

KlangFool
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Re: FAANG

Post by KlangFool » Wed Dec 19, 2018 6:25 pm

KyleAAA wrote:
Wed Dec 19, 2018 6:13 pm
KlangFool wrote:
Wed Dec 19, 2018 5:54 pm
KyleAAA wrote:
Wed Dec 19, 2018 5:49 pm
quantAndHold wrote:
Wed Dec 19, 2018 5:46 pm
3 of these companies have market caps above $700B, one is at $300B, and the tiny one is at $100B. All of them are already dominant players globally in their respective markets. The bulk of their growth will have to come from new products, not from expanding the market for their existing products. That carries some risk. Once a company gets that big, 20-30% growth, year after year after year, gets pretty hard. They are also very well known, heavily followed companies, so it’s not likely that you know more about them than any other investor.

TL;DR - they seem fairly priced to me.
False. Amazon in particular can grow 30% for a decade without entering any new markets. The cloud TAM is just that big, and they have the additional option of tapping adjacent SaaS markets. Their TAM is literally trillions of dollars at present.
KyleAAA,

Let's assume that it is true, so what? It may not drive the stock price up. It is built into the current Amazon's stock price. Amazon has to beat the expectation in order to drive up the stock price. Amazon's PE ratio is above 83 now. In fact, if Amazon only grows 30% per year, the stock price will go down. It is below expectation.

KlangFool
It is not built into the current stock price. I was referring to the stock price with the 30% number. Earnings can grow much faster without entering new markets.
KyleAAA,

1) The P/E is 83 now. How much faster than it needs to be in order to drive the stock price up 30% per year?

2) But, the bigger picture question here is even if you are right, so what? How many percents of your portfolio is in Amazon's stock?

A) If it is 5% or less, why bother?

B) If it is much greater than 5%, why take so much risk for a possible 30% gain?

KlangFool

quantAndHold
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Re: FAANG

Post by quantAndHold » Wed Dec 19, 2018 6:29 pm

KyleAAA wrote:
Wed Dec 19, 2018 5:49 pm
quantAndHold wrote:
Wed Dec 19, 2018 5:46 pm
3 of these companies have market caps above $700B, one is at $300B, and the tiny one is at $100B. All of them are already dominant players globally in their respective markets. The bulk of their growth will have to come from new products, not from expanding the market for their existing products. That carries some risk. Once a company gets that big, 20-30% growth, year after year after year, gets pretty hard. They are also very well known, heavily followed companies, so it’s not likely that you know more about them than any other investor.

TL;DR - they seem fairly priced to me.
False. Amazon in particular can grow 30% for a decade without entering any new markets. The cloud TAM is just that big, and they have the additional option of tapping adjacent SaaS markets. Their TAM is literally trillions of dollars at present. Microsoft can as well. Google and Apple won’t be able to.
I’m fully aware of Amazon’s cloud, and I agree that of any of these 5 companies, Amazon is best positioned, mostly because of the sheer diversity of their products. But I also think that growth is already fully priced into the stock.
Last edited by quantAndHold on Thu Dec 20, 2018 1:10 am, edited 1 time in total.
Yes, I’m really that pedantic.

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Re: FAANG

Post by KyleAAA » Wed Dec 19, 2018 6:53 pm

KlangFool wrote:
Wed Dec 19, 2018 6:25 pm
KyleAAA wrote:
Wed Dec 19, 2018 6:13 pm
KlangFool wrote:
Wed Dec 19, 2018 5:54 pm
KyleAAA wrote:
Wed Dec 19, 2018 5:49 pm
quantAndHold wrote:
Wed Dec 19, 2018 5:46 pm
3 of these companies have market caps above $700B, one is at $300B, and the tiny one is at $100B. All of them are already dominant players globally in their respective markets. The bulk of their growth will have to come from new products, not from expanding the market for their existing products. That carries some risk. Once a company gets that big, 20-30% growth, year after year after year, gets pretty hard. They are also very well known, heavily followed companies, so it’s not likely that you know more about them than any other investor.

TL;DR - they seem fairly priced to me.
False. Amazon in particular can grow 30% for a decade without entering any new markets. The cloud TAM is just that big, and they have the additional option of tapping adjacent SaaS markets. Their TAM is literally trillions of dollars at present.
KyleAAA,

Let's assume that it is true, so what? It may not drive the stock price up. It is built into the current Amazon's stock price. Amazon has to beat the expectation in order to drive up the stock price. Amazon's PE ratio is above 83 now. In fact, if Amazon only grows 30% per year, the stock price will go down. It is below expectation.

KlangFool
It is not built into the current stock price. I was referring to the stock price with the 30% number. Earnings can grow much faster without entering new markets.
KyleAAA,

1) The P/E is 83 now. How much faster than it needs to be in order to drive the stock price up 30% per year?

2) But, the bigger picture question here is even if you are right, so what? How many percents of your portfolio is in Amazon's stock?

A) If it is 5% or less, why bother?

B) If it is much greater than 5%, why take so much risk for a possible 30% gain?

KlangFool
None of my portfolio is in AMZN for reasons that have nothing to do with its investment potential. And "just" a 30% per year gain? I'm puzzled that you think 30% per year isn't significant. People have been asking the same question for 20 years now and AMZN keeps outperforming anyway. One would think people would eventually learn their lesson, especially given their potential is much larger now than it was 10 years ago.

KlangFool
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Re: FAANG

Post by KlangFool » Wed Dec 19, 2018 7:13 pm

KyleAAA wrote:
Wed Dec 19, 2018 6:53 pm

None of my portfolio is in AMZN for reasons that have nothing to do with its investment potential. And "just" a 30% per year gain? I'm puzzled that you think 30% per year isn't significant. People have been asking the same question for 20 years now and AMZN keeps outperforming anyway. One would think people would eventually learn their lesson, especially given their potential is much larger now than it was 10 years ago.
KyleAAA,

<<And "just" a 30% per year gain? I'm puzzled that you think 30% per year isn't significant.>>

Why? It is too small to matter.

A) At 30% per year, in order to make a difference in my life, I have to invest a lot more than 5% of my portfolio to make a difference.

B) It is not worth the risk.

Compare this to something that could return 10X to 30X. I only need to put in less than 1% of my money in order to make a difference.

KlangFool

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Re: FAANG

Post by jharkin » Wed Dec 19, 2018 7:34 pm

And after amazon grows to a couple trillion... the feds step in and break it up ala AT&T.

No thanks... moving on.

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Re: FAANG

Post by KyleAAA » Wed Dec 19, 2018 10:04 pm

KlangFool wrote:
Wed Dec 19, 2018 7:13 pm
KyleAAA wrote:
Wed Dec 19, 2018 6:53 pm

None of my portfolio is in AMZN for reasons that have nothing to do with its investment potential. And "just" a 30% per year gain? I'm puzzled that you think 30% per year isn't significant. People have been asking the same question for 20 years now and AMZN keeps outperforming anyway. One would think people would eventually learn their lesson, especially given their potential is much larger now than it was 10 years ago.
KyleAAA,

<<And "just" a 30% per year gain? I'm puzzled that you think 30% per year isn't significant.>>

Why? It is too small to matter.

A) At 30% per year, in order to make a difference in my life, I have to invest a lot more than 5% of my portfolio to make a difference.

B) It is not worth the risk.

Compare this to something that could return 10X to 30X. I only need to put in less than 1% of my money in order to make a difference.

KlangFool
If it's less than 5% of your portfolio, there isn't significant risk. Even at 5% of your portfolio, that would boost your annual returns by 1.5% per year. I don't see how you can say that wouldn't be significant. I would retire EXTREMELY wealthy in 10 years if I got an extra 1.5%.

KlangFool
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Re: FAANG

Post by KlangFool » Wed Dec 19, 2018 10:23 pm

KyleAAA wrote:
Wed Dec 19, 2018 10:04 pm

If it's less than 5% of your portfolio, there isn't significant risk. Even at 5% of your portfolio, that would boost your annual returns by 1.5% per year. I don't see how you can say that wouldn't be significant. I would retire EXTREMELY wealthy in 10 years if I got an extra 1.5%.
KyleAAA,

1) I am not going to put 5% of my portfolio into one stock.

<<Even at 5% of your portfolio, that would boost your annual returns by 1.5% per year.>>

2) Gambling 5% of my portfolio in order to get 1.5% extra is a lousy bet.

3) Gambling less than 1% of my portfolio in order to get 1% to 3% extra is a good bet.

<<I don't see how you can say that wouldn't be significant. I would retire EXTREMELY wealthy in 10 years if I got an extra 1.5%.>>

4) I can retire in less than 5 years with a nominal 5% return. So, that extra 1.5% is doing nothing for me.

5) In return, you are risking 5% of your portfolio. You need to be right for at least 3 to 4 years before you are even.

KlangFool

tesuzuki2002
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Re: FAANG

Post by tesuzuki2002 » Wed Dec 19, 2018 10:50 pm

Mcgrass wrote:
Wed Dec 19, 2018 1:55 pm
They did so well then tanked for reasons beyond me. I didn't sell all of them and they continued to fall. Now they seem like screaming bargains to me, but the rest of the world doesn't agree. I plan to just hold what I've got on the premise that they'll eventually return to their highs over the next few years. What are other people doing?
"Bargain" Is relative... they are tech companies... as such when NEW TECH comes along FAANG isn't worth much anymore.

drk
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Re: FAANG

Post by drk » Thu Dec 20, 2018 12:27 am

tesuzuki2002 wrote:
Wed Dec 19, 2018 10:50 pm
"Bargain" Is relative... they are tech companies... as such when NEW TECH comes along FAANG isn't worth much anymore.
Like how Snap killed off Facebook? And Bing killed off Google? And Jet killed off Amazon?

The phrase "tech companies" is completely empty. These are just companies. Of course, they can still be disrupted, just as Ford/GM/Chrysler, GE, IBM, and US Steel all have been. But it's bizarre to pretend that they aren't omnipresent in the American economy today.

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Re: FAANG

Post by KyleAAA » Thu Dec 20, 2018 1:59 am

KlangFool wrote:
Wed Dec 19, 2018 10:23 pm
KyleAAA wrote:
Wed Dec 19, 2018 10:04 pm

If it's less than 5% of your portfolio, there isn't significant risk. Even at 5% of your portfolio, that would boost your annual returns by 1.5% per year. I don't see how you can say that wouldn't be significant. I would retire EXTREMELY wealthy in 10 years if I got an extra 1.5%.
KyleAAA,

1) I am not going to put 5% of my portfolio into one stock.

<<Even at 5% of your portfolio, that would boost your annual returns by 1.5% per year.>>

2) Gambling 5% of my portfolio in order to get 1.5% extra is a lousy bet.

3) Gambling less than 1% of my portfolio in order to get 1% to 3% extra is a good bet.

<<I don't see how you can say that wouldn't be significant. I would retire EXTREMELY wealthy in 10 years if I got an extra 1.5%.>>

4) I can retire in less than 5 years with a nominal 5% return. So, that extra 1.5% is doing nothing for me.

5) In return, you are risking 5% of your portfolio. You need to be right for at least 3 to 4 years before you are even.

KlangFool
I am not risking 5% of my portfolio. Amazon isn't going to go to 0. And no, Enron is not an apt comparison.

minimalistmarc
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Re: FAANG

Post by minimalistmarc » Thu Dec 20, 2018 2:12 am

KyleAAA wrote:
Thu Dec 20, 2018 1:59 am
KlangFool wrote:
Wed Dec 19, 2018 10:23 pm
KyleAAA wrote:
Wed Dec 19, 2018 10:04 pm

If it's less than 5% of your portfolio, there isn't significant risk. Even at 5% of your portfolio, that would boost your annual returns by 1.5% per year. I don't see how you can say that wouldn't be significant. I would retire EXTREMELY wealthy in 10 years if I got an extra 1.5%.
KyleAAA,

1) I am not going to put 5% of my portfolio into one stock.

<<Even at 5% of your portfolio, that would boost your annual returns by 1.5% per year.>>

2) Gambling 5% of my portfolio in order to get 1.5% extra is a lousy bet.

3) Gambling less than 1% of my portfolio in order to get 1% to 3% extra is a good bet.

<<I don't see how you can say that wouldn't be significant. I would retire EXTREMELY wealthy in 10 years if I got an extra 1.5%.>>

4) I can retire in less than 5 years with a nominal 5% return. So, that extra 1.5% is doing nothing for me.

5) In return, you are risking 5% of your portfolio. You need to be right for at least 3 to 4 years before you are even.

KlangFool
I am not risking 5% of my portfolio. Amazon isn't going to go to 0. And no, Enron is not an apt comparison.
You have a lot to learn.

Most bogleheads thought like you when they were starting out.

WanderingDoc
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Re: FAANG

Post by WanderingDoc » Thu Dec 20, 2018 2:14 am

Thegame14 wrote:
Wed Dec 19, 2018 1:59 pm
I haven't held an individual stock since I sold apply at $125 4 years (bought it at $89) ago to pay for my last semester of my MBA, instead of taking out loans. I am however very tempted to buy shares of Apple if they dip under $160, I don't see it going any lower than $150 if we have another big down day for the overall market. Their main issues is slow sales on new iphones, but that is because the Xs is over $1,000 and they have crappy trade in promotions. All they would have to do is announce a price drop or better trade in promotion and people would trade up and their sales would go up. I think they finally realized that iphones due have some price elasticity.
Big down day? It's time to get ready to think of the S&P500 in terms of down years, not down days :beer
I'm not looking to get rich quick (stocks), I'm not looking to get rich slow (indexing), I'm looking to get rich, for sure (real estate) | Don't wait to buy real estate. Buy real estate.. and wait.

WanderingDoc
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Re: FAANG

Post by WanderingDoc » Thu Dec 20, 2018 2:16 am

KyleAAA wrote:
Wed Dec 19, 2018 5:17 pm
KlangFool wrote:
Wed Dec 19, 2018 5:14 pm
Folks,

Why would you put any money into those individual stocks when you know that they have no possibility of going up 10X to 30X over the next few years?

A) I only put my "play money" into individual stocks.

B) I only gamble on individual stocks that have the possibility of going up 10X to 30X.

KlangFool
Because they are dominant in their industries and tend to have amazing profitability minus Amazon and Netflix. There are risks, but 20-30% returns going forward are also realistic. I also wouldn’t count Amazon our specifically in terms of 10x potential.
20-30% returns.. over what time period?
I'm not looking to get rich quick (stocks), I'm not looking to get rich slow (indexing), I'm looking to get rich, for sure (real estate) | Don't wait to buy real estate. Buy real estate.. and wait.

jharkin
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Location: Boston suburbs

Re: FAANG

Post by jharkin » Thu Dec 20, 2018 7:39 am

minimalistmarc wrote:
Thu Dec 20, 2018 2:12 am

You have a lot to learn.

Most bogleheads thought like you when they were starting out.
I believe Kyle is on the younger side, works in the FAANGs, and did not experience the dotcom implosion as an insider... Some folks just need to learn by experience.... unfortunately that experience can be painful when the bottom falls out.

I remember driving by a pets.com building every day on my commute and friends telling me I was blowing the opportunity of a lifetime not jumping ship to a startup. 2 years later most of those friends where unemployed and had lost everything. People said the same thing about flipping houses 7 years later... and about Enron. And about Lehman/Bear. I could go on.........

z3r0c00l
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Contact:

Re: FAANG

Post by z3r0c00l » Thu Dec 20, 2018 7:53 am

jharkin wrote:
Thu Dec 20, 2018 7:39 am
minimalistmarc wrote:
Thu Dec 20, 2018 2:12 am

You have a lot to learn.

Most bogleheads thought like you when they were starting out.
I believe Kyle is on the younger side, works in the FAANGs, and did not experience the dotcom implosion as an insider... Some folks just need to learn by experience.... unfortunately that experience can be painful when the bottom falls out.

I remember driving by a pets.com building every day on my commute and friends telling me I was blowing the opportunity of a lifetime not jumping ship to a startup. 2 years later most of those friends where unemployed and had lost everything. People said the same thing about flipping houses 7 years later... and about Enron. And about Lehman/Bear. I could go on.........
Well it is an unfair comparison, since these companies actually sell product and in a few cases, are highly profitable. Apple, Google, and Facebook all make bank every year. Apple and Google in particular. Netflix and Amazon have actually and substantially disrupted their industries. They may not be very profitable yet, but they are taken a huge bite out of media and retail. I cancelled cable years ago, but use Netflix daily, and do most shopping on Amazon. None of this is meant as an argument in favor of holding individual stocks. But these are not just a bunch of dotcom's anymore.
Last edited by z3r0c00l on Thu Dec 20, 2018 8:00 am, edited 1 time in total.

Valuethinker
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Re: FAANG

Post by Valuethinker » Thu Dec 20, 2018 7:59 am

jharkin wrote:
Thu Dec 20, 2018 7:39 am
minimalistmarc wrote:
Thu Dec 20, 2018 2:12 am

You have a lot to learn.

Most bogleheads thought like you when they were starting out.
I believe Kyle is on the younger side, works in the FAANGs, and did not experience the dotcom implosion as an insider... Some folks just need to learn by experience.... unfortunately that experience can be painful when the bottom falls out.

I remember driving by a pets.com building every day on my commute and friends telling me I was blowing the opportunity of a lifetime not jumping ship to a startup. 2 years later most of those friends where unemployed and had lost everything. People said the same thing about flipping houses 7 years later... and about Enron. And about Lehman/Bear. I could go on.........
Enron looked a lot more solid than the dot coms. It had real assets and real businesses. The scale of the financial engineering and deceit was just not widely understood. One could say something similar about Worldcom, which had real switches, real customers, real traffic. Or Nortel which had a huge installed base of customer equipment, world leading software etc.

Lehman and Bear Sterns suffered from the problem that all financial companies suffer from. They are essentially confidence games. If confidence collapses, they collapse. See FNMA FMAC AIG RBS etc. There's no way to make a financial company bomb proof, because the model is essentially to take money from depositors, bond investors, policyholders etc. and recycle it into assets - they are inherently highly leveraged.

KlangFool
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Re: FAANG

Post by KlangFool » Thu Dec 20, 2018 8:00 am

z3r0c00l wrote:
Thu Dec 20, 2018 7:53 am
jharkin wrote:
Thu Dec 20, 2018 7:39 am
minimalistmarc wrote:
Thu Dec 20, 2018 2:12 am

You have a lot to learn.

Most bogleheads thought like you when they were starting out.
I believe Kyle is on the younger side, works in the FAANGs, and did not experience the dotcom implosion as an insider... Some folks just need to learn by experience.... unfortunately that experience can be painful when the bottom falls out.

I remember driving by a pets.com building every day on my commute and friends telling me I was blowing the opportunity of a lifetime not jumping ship to a startup. 2 years later most of those friends where unemployed and had lost everything. People said the same thing about flipping houses 7 years later... and about Enron. And about Lehman/Bear. I could go on.........
Well it is an unfair comparison, since these companies actually sell product and in most cases, are highly profitable. Apple, Google, and Facebook all make bank every year. Apple and Google in particular. Netflix and Amazon have actually and substantially disrupted their industries. They may not be very profitable yet, but they are taken a huge bite out of media and retail. I cancelled cable years ago, but use Netflix daily, and do most shopping on Amazon. None of this is meant as an argument in favor of holding individual stocks. But these are not just a bunch of dotcom's anymore.
And everyone know and expect that. They have to beat their expectations consistently in order to drive their stock price up. At current stock price, they are more likely to go down than up.

KlangFool

Valuethinker
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Re: FAANG

Post by Valuethinker » Thu Dec 20, 2018 8:02 am

z3r0c00l wrote:
Thu Dec 20, 2018 7:53 am
jharkin wrote:
Thu Dec 20, 2018 7:39 am
minimalistmarc wrote:
Thu Dec 20, 2018 2:12 am

You have a lot to learn.

Most bogleheads thought like you when they were starting out.
I believe Kyle is on the younger side, works in the FAANGs, and did not experience the dotcom implosion as an insider... Some folks just need to learn by experience.... unfortunately that experience can be painful when the bottom falls out.

I remember driving by a pets.com building every day on my commute and friends telling me I was blowing the opportunity of a lifetime not jumping ship to a startup. 2 years later most of those friends where unemployed and had lost everything. People said the same thing about flipping houses 7 years later... and about Enron. And about Lehman/Bear. I could go on.........
Well it is an unfair comparison, since these companies actually sell product and in most cases, are highly profitable. Apple, Google, and Facebook all make bank every year. Apple and Google in particular. Netflix and Amazon have actually and substantially disrupted their industries. They may not be very profitable yet, but they are taken a huge bite out of media and retail. I cancelled cable years ago, but use Netflix daily, and do most shopping on Amazon. None of this is meant as an argument in favor of holding individual stocks. But these are not just a bunch of dotcom's anymore.
That's the key. The FAANGs are not the dot coms (Tesla looks more like a dot com -- underlying cash flow generation not there (perhaps), sky high valuation). Amazon now is not Amazon in 2000. Apple has the largest corporate cash pile in history, etc.

(Netflix is the outlier, given its cash consumptive content creation and customer acquisition model - they have to pedal very fast to stay upright).

The problem is they have grown so large that they can't escape broader trends - they have clawed so much market share in digital advertising, f'rinstance, that the gains become smaller from here (at least in percentage terms).

Microsoft which is usually short formed with the FAANGs is one of the key ones - because MSFT is a prodigious generator of profits and cash flow, despite pedestrian revenue growth (compared to MSFT in the 1990s). The movement to the software rental model increases the quality of its earnings, as well.

Valuethinker
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Re: FAANG

Post by Valuethinker » Thu Dec 20, 2018 8:04 am

Mcgrass wrote:
Wed Dec 19, 2018 1:55 pm
They did so well then tanked for reasons beyond me. I didn't sell all of them and they continued to fall. Now they seem like screaming bargains to me, but the rest of the world doesn't agree. I plan to just hold what I've got on the premise that they'll eventually return to their highs over the next few years. What are other people doing?
You are piling risk on to one sector, one sector which has done phenomenally well.

Beware catching a falling knife.

If you read up on the "Nifty Fifty" stocks era of the 1970s (Kodak, Polariod, P&G etc.) and how that ended (badly) you will see the companies still did OK (mostly) but the Price to Earnings ratio the market was prepared to apply to the stocks collapsed. You don't have to be a bad company to wind up with a big fall in share price.

jharkin
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Re: FAANG

Post by jharkin » Thu Dec 20, 2018 8:20 am

I am not saying that the FAANGs are identical to the dotcoms... I am saying that the blind faith that they can never go down seems eerily similar.

I dont always agree with him but I think Klang makes a very good point that these companies have got so big, so fast, its hard to see how than can grow significantly bigger. And I dont think the chance of an anti-trust breakup is off the table either.

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simplesimon
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Re: FAANG

Post by simplesimon » Thu Dec 20, 2018 8:24 am

Valuethinker wrote:
Thu Dec 20, 2018 8:04 am
You don't have to be a bad company to wind up with a big fall in share price.
+1. There is significant reliance on future growth in the present value of these firms. Even slight downward adjustments in these assumptions have a huge impact on the PV. Run the numbers for yourselves and see.

Valuethinker
Posts: 40291
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Re: FAANG

Post by Valuethinker » Thu Dec 20, 2018 8:30 am

jharkin wrote:
Thu Dec 20, 2018 8:20 am
I am not saying that the FAANGs are identical to the dotcoms... I am saying that the blind faith that they can never go down seems eerily similar.

I dont always agree with him but I think Klang makes a very good point that these companies have got so big, so fast, its hard to see how than can grow significantly bigger. And I dont think the chance of an anti-trust breakup is off the table either.
I suspect if you kept all of the daughters and sons of Standard Oil and held them to the present day through all the takeovers and mergers that as an investor you did well. Not sure about the breakups of the other "Trusts" -- don't know enough about them.

If you broke up Google, you'd actually destroy public value. The internet is like this vast, giant plain without landform obstacles, or in economic terms "increasing returns to scale across all volumes" for search. Search naturally tends towards one provider.

Where that takes you is Google as a regulated utility. Facebook perhaps the similar. Microsoft is getting pretty close to an (unregulated) utility.

The companies are sure to be snared into politics, and national security, to a far greater extent in the future than they have been in the past.

The gawky adolescents of the internet have grown up and cannot now escape all the responsibilities and problems of adulthood.

wolf359
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Re: FAANG

Post by wolf359 » Thu Dec 20, 2018 9:06 am

bradpevans wrote:
Wed Dec 19, 2018 2:57 pm
Mcgrass wrote:
Wed Dec 19, 2018 1:55 pm
They did so well then tanked for reasons beyond me. I didn't sell all of them and they continued to fall. Now they seem like screaming bargains to me, but the rest of the world doesn't agree. I plan to just hold what I've got on the premise that they'll eventually return to their highs over the next few years. What are other people doing?
first question - what made you buy in the first place? Is that still true?
comment: many (most?) on this board see "too much risk" in individual stocks
second question: do these FAANG stocks have specific issues (like FB privacy concerns) or macro concerns? (like world economy slowing / like "everyone already has an iphone")

When it comes to stocks, it probably a pretty high certainty that all five of these will come back to new highs...
a) but when
b) will others gain (%) much faster

if you knew a) and b)....
During the tech bubble, the market concentrated into a few big winners as well. Back then they were known as the "Gorillas" and included Microsoft and Cisco. They were the big players who were dominating their market segments and pretty much owned the industry or were gobbling up the smaller players.

After the tech crash, Cisco took 15 years to recover its peak and make new highs. It never stopped being a good (profitable, dominant) company, but it was a lousy stock for a while.

3funder
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Re: FAANG

Post by 3funder » Thu Dec 20, 2018 9:56 am

gluskap wrote:
Wed Dec 19, 2018 4:53 pm
FAANG is already a large part of the holdings of VTSAX. I'm not sure I want to increase my risk by buying even more. It's like timing the market, yeah they will probably go up eventually but what if they continue to go down more before they go back up? Or what if they stay flat for a few years before going back up again? I'd rather just stick to being diversified and holding the whole market and not worry about figuring out the best time to buy and sell individual stocks.
Couldn't have said it any better myself.

drk
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Re: FAANG

Post by drk » Thu Dec 20, 2018 10:46 am

jharkin wrote:
Thu Dec 20, 2018 8:20 am
I am not saying that the FAANGs are identical to the dotcoms... I am saying that the blind faith that they can never go down seems eerily similar.
That's fair. In that line, though, I'd argue that the better points of comparison are GE, IBM, Exxon, GM, Citigroup, etc. No dot-com company had a decade-long-plus office presence in dozens of cities around the world.

2015
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Re: FAANG

Post by 2015 » Thu Dec 20, 2018 4:55 pm

minimalistmarc wrote:
Thu Dec 20, 2018 2:12 am
KyleAAA wrote:
Thu Dec 20, 2018 1:59 am
KlangFool wrote:
Wed Dec 19, 2018 10:23 pm
KyleAAA wrote:
Wed Dec 19, 2018 10:04 pm
You have a lot to learn.

Most bogleheads thought like you when they were starting out.
That's not true. Some of us didn't think at all.

When I grow up I want to have "play money" like KlangFool does (but I'll be dead before that happens). Unfortunately, right now all that money is getting played into a house remodel.

SlowlySaving
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Re: FAANG

Post by SlowlySaving » Thu Dec 20, 2018 5:46 pm

KyleAAA wrote:
Wed Dec 19, 2018 5:17 pm
KlangFool wrote:
Wed Dec 19, 2018 5:14 pm
Folks,

Why would you put any money into those individual stocks when you know that they have no possibility of going up 10X to 30X over the next few years?

A) I only put my "play money" into individual stocks.

B) I only gamble on individual stocks that have the possibility of going up 10X to 30X.

KlangFool
Because they are dominant in their industries and tend to have amazing profitability minus Amazon and Netflix. There are risks, but 20-30% returns going forward are also realistic. I also wouldn’t count Amazon our specifically in terms of 10x potential.
I am a fan of Amazon and Google. I just can't see them not dominating their current markets and new markets in the future. I will try to accumulate more shares at these reduced price levels!

LiterallyIronic
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Re: FAANG

Post by LiterallyIronic » Thu Dec 20, 2018 5:55 pm

KlangFool wrote:
Wed Dec 19, 2018 5:14 pm
Why would you put any money into those individual stocks when you know that they have no possibility of going up 10X to 30X over the next few years?
Frankly, I don't know that. I don't know they have no possibility of going up 10X to 30X over the next few years. Maybe a FAANG company will invent the teleporter three years from now and make trillions of dollars. Maybe some other company will instead. Maybe nobody will. That's why I don't buy any individual stock.

cheapskate
Posts: 807
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Re: FAANG

Post by cheapskate » Thu Dec 20, 2018 6:35 pm

wolf359 wrote:
Thu Dec 20, 2018 9:06 am
bradpevans wrote:
Wed Dec 19, 2018 2:57 pm
Mcgrass wrote:
Wed Dec 19, 2018 1:55 pm
They did so well then tanked for reasons beyond me. I didn't sell all of them and they continued to fall. Now they seem like screaming bargains to me, but the rest of the world doesn't agree. I plan to just hold what I've got on the premise that they'll eventually return to their highs over the next few years. What are other people doing?
first question - what made you buy in the first place? Is that still true?
comment: many (most?) on this board see "too much risk" in individual stocks
second question: do these FAANG stocks have specific issues (like FB privacy concerns) or macro concerns? (like world economy slowing / like "everyone already has an iphone")

When it comes to stocks, it probably a pretty high certainty that all five of these will come back to new highs...
a) but when
b) will others gain (%) much faster

if you knew a) and b)....
During the tech bubble, the market concentrated into a few big winners as well. Back then they were known as the "Gorillas" and included Microsoft and Cisco. They were the big players who were dominating their market segments and pretty much owned the industry or were gobbling up the smaller players.

After the tech crash, Cisco took 15 years to recover its peak and make new highs. It never stopped being a good (profitable, dominant) company, but it was a lousy stock for a while.
Agree completely...

In Silicon Valley at that time, "The Gorilla Game" was a very popular book. Along with Clayton Christensen's book and another (now obscure) title called "Crossing the Chasm". The books seemed quite relevant because several companies claimed having disruptive technologies and were posting 100%+ YoY growth rates, several years in a row. No one thought Juniper, NetApp, EMC and the like would ever come crashing down, let alone cisco (the largest of them all, the best of them all, whose equipment was crucial in the build out of the internet). After the bubble burst, hardly anyone talked about the innovators dilemma or disruptive technologies or gorillas.

All these names (and more) had real products and technologies that the world needed and bought. They have been consistently profitable since the 2000-2002 bust. Yet very few of them have reached the valuations they had at the peak of the bubble.

Example: csco's market cap today is 191B. At the peak of the bubble, it was valued over 500B (the most valuable company in the world for a short amount of time). So csco is not anywhere near the highs reached then. But csco's revenues and profits today are vastly higher than they were in 1999.

There is no guarantee that the FAANGs are destined to permanent glory and ever escalating stock prices.

Valuethinker
Posts: 40291
Joined: Fri May 11, 2007 11:07 am

Re: FAANG

Post by Valuethinker » Fri Dec 21, 2018 6:08 am

cheapskate wrote:
Thu Dec 20, 2018 6:35 pm
wolf359 wrote:
Thu Dec 20, 2018 9:06 am
bradpevans wrote:
Wed Dec 19, 2018 2:57 pm
Mcgrass wrote:
Wed Dec 19, 2018 1:55 pm
They did so well then tanked for reasons beyond me. I didn't sell all of them and they continued to fall. Now they seem like screaming bargains to me, but the rest of the world doesn't agree. I plan to just hold what I've got on the premise that they'll eventually return to their highs over the next few years. What are other people doing?
first question - what made you buy in the first place? Is that still true?
comment: many (most?) on this board see "too much risk" in individual stocks
second question: do these FAANG stocks have specific issues (like FB privacy concerns) or macro concerns? (like world economy slowing / like "everyone already has an iphone")

When it comes to stocks, it probably a pretty high certainty that all five of these will come back to new highs...
a) but when
b) will others gain (%) much faster

if you knew a) and b)....
During the tech bubble, the market concentrated into a few big winners as well. Back then they were known as the "Gorillas" and included Microsoft and Cisco. They were the big players who were dominating their market segments and pretty much owned the industry or were gobbling up the smaller players.

After the tech crash, Cisco took 15 years to recover its peak and make new highs. It never stopped being a good (profitable, dominant) company, but it was a lousy stock for a while.
Agree completely...

In Silicon Valley at that time, "The Gorilla Game" was a very popular book. Along with Clayton Christensen's book and another (now obscure) title called "Crossing the Chasm". The books seemed quite relevant because several companies claimed having disruptive technologies and were posting 100%+ YoY growth rates, several years in a row. No one thought Juniper, NetApp, EMC and the like would ever come crashing down, let alone cisco (the largest of them all, the best of them all, whose equipment was crucial in the build out of the internet). After the bubble burst, hardly anyone talked about the innovators dilemma or disruptive technologies or gorillas.

All these names (and more) had real products and technologies that the world needed and bought. They have been consistently profitable since the 2000-2002 bust. Yet very few of them have reached the valuations they had at the peak of the bubble.

Example: csco's market cap today is 191B. At the peak of the bubble, it was valued over 500B (the most valuable company in the world for a short amount of time). So csco is not anywhere near the highs reached then. But csco's revenues and profits today are vastly higher than they were in 1999.

There is no guarantee that the FAANGs are destined to permanent glory and ever escalating stock prices.
I would note that "Disruption" is a constant theme of internet startups in the last few years. Everybody is going to "disrupt" some existing industry.

So the Clayton Christensen stuff is very present.

In the academic community, at least, the theory has come under some attack.

It has however reshaped corporate strategy. If you look at Amazon, Google, Facebook they are prodigious buyers of small companies: so WhatsAp had no revenues and 450 engineers, and Facebook paid ?over $5 bn? for it. Instagram etc. Microsoft buying LinkedIn.

In some sense the big internet cos are becoming like the drug stocks - outsourcing part of their R&D to their acquisitions budget.

That poses risks for the next generation of emergent technologies - the companies may get snuffed out, acquired at birth. Certainly it's a brave VC that turns down 100% IRR on its investment 18 months earlier. Or a Founder who turns down a cool $100m or so.

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