I tend not to worry too much about individual shares’ performance as I don’t believe that picking shares is a recipe for success for us mere retail punters. I work on the assumption that the person on the other end of the transaction knows more than I do. Which is why I stick to funds and pay a gonk to worry about this on my behalf.
But when the collective FAANGs (Facebook, Apple, Amazon, Netflix and Google) make up about 11% of the US stock market, their progress silently impacts most of our investment portfolios and pensions. This week has been a big week as the tech giants report how they did over the three months to June.
Facebook shares took a 20% tumble on Wednesday after disappointing results. (I’ve always thought that running a listed business is like being in a permanent business episode of Love Island – the public vote which wipes $140 billion of your company value in one day is a fairly damning indictment of your progress!)
In fact over the last year, its revenues have grown by over 40%. More than respectable, but the firm missed revenue expectations for the first time since 2015 and the market doesn’t like surprises. Future margins are also expected to slide from 44% to the mid 30s, so the outlook is touch cloudier. A contributing headache is of course the new European privacy laws and GDPR – in Europe, daily active users of Facebook fell by 3 million over the quarter. Whether this share price slump is an over-reaction and a buying opportunity – or the beginning of the end – remains to be seen. But I wouldn’t be too quick to write them off.
Profits reported this week were more than double what investors predicted and the shares went up by over 3%. Main drivers are cloud computing services and Prime subscriptions. The business is now worth a staggering $875 billion, surpassed only by Apple. Five years ago its shares were trading at $300 - as I write this they’re around the $1860 mark.
Netflix were another tech-darling disappointment last week, their shares fell on the back of lower than expected subscriber numbers. Twitter is due to report today – its shares are up over 80% over the year so far and the ‘futures’ market (where people effectively bet on future price movements of shares, and buy what I think of as a token to exchange for shares at a locked-in price in the future) suggests that the news today will be good and the shares will go up. People are predicting revenues of $700 million for the last 3 month period.
So – a mixed bag of news for the FAANGS and trendy tech stocks. I don’t feel the particular need to do anything – the good news is largely balancing out the disappointments and as usual having a broad diversified mixed bag of stuff makes a lot of sense.
Have a great weekend all – I have never been so delighted at the prospect of rain! Hooray