It is natural for investors to question the logic behind the seemingly never-ending strength in FANG, even at a time when there is no new news, CNBC’s Jim Cramer acknowledged during his daily “Mad Money” show Thursday.
Cramer is credited with co-creating the FANG acronym to loop together some of the hottest technology and internet stocks in 2013, including Facebook Inc FB 0.01%, Amazon.com, Inc. AMZN 0.91%, Netflix, Inc. NFLX 0.05%, and Google/Alphabet Inc GOOG 0.44% GOOGL 0.47%. At that time, the four companies best exemplified his investment philosophy, and investors who listened to his advice are sitting on large gains.
But four years later, is the ongoing strength in the stocks still due to fundamentals and the companies’ strong outlook? Or, is the strength more to do with the “greater fool theory,” which implies investors buy a stock today only under the assumption someone will pay even more for it tomorrow.
“In this particular case, I think the answer is an emphatic no,” Cramer answered his own question. “The truth is that these companies are constantly innovating, always giving you new earnings-additive reasons to buy their stocks.”
In Facebook’s case, the company announced Thursday it will launch a new subscription-based news service and partner with several media outlets to give users compelling content, Cramer continued. Meanwhile, Amazon announced a partnership with Sears Holdings Corp SHLD 2.29% to sell Kenmore branded appliances -— one of the “best brand names” in the industry.
Netflix continues to wow its consumer base by supporting locally generated videos and then finding a market for the content across the world. For example, “Okja” is a South Korean directed film about a genetically engineered pig that “put international sign-ups over the top of domestics.”
Finally, Alphabet’s Google promised users it will deliver a personalized news feed that will “keep you in the know even when you’re not searching.”
“As long as that continues to happen, these stocks can continue to go higher, and you shouldn’t feel foolish for pulling the trigger because they seem to introduce needle movers every single day of the week,” Cramer concluded.