The fangs of FANG+ stocks are deadlier than thou

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With the advent of more Indian retail investors eyeing US stock markets as a route to portfolio diversification, Mirae Asset Mutual Fund announced two open ended New Fund Offers (NFO) in the FANG+ index.

What is FANG+?

New York Stock Exchange’s (NYSE) FANG+ index is an equally weighted 10-stock index that comprises the FAANG bouquet of Facebook, Amazon, Apple, Netflix and Google; plus additional five stocks, which include the likes of Tesla and AliBaba. Nvidia, Baidu and Twitter make up the rest.

Recently, a report by fintech startup Winvesta stated that Electric Mobility and Blockchain stocks had found more favour among investors over the FAANG stocks.

Speaking on the FANG+ index to Money9 in an interview, Swarup Mohanty, CEO of Mirae Asset MF, said: “The companies you are talking about are phenomenal. If you look at their size, their scope, the way they have grown in the last decade or so and what they’ve brought to the world is unbelievable. And as we speak, they continue to reinvent themselves, invest reinvest in themselves, and then look forward to a changed world.”

Each of the ten stocks in the FANG+ index are weighted equally at 10%. Together, the FANG+ market capitalisation is three times that of all equities listed on India’s BSE, according to a presentation by Mirae Asset MF.

Not surprisingly, the FANG+ index has outperformed the S&P 500, NASDAQ 100 as well as all major Indian indices last year. In combined revenue at $1.09 trillion, these ten companies exceed the Indian government’s total receipt for FY 2019-20.

“Make no mistake, you will try to avoid them, but you cannot cannot avoid those companies featuring in your life,” Mohanty said referring to the ten stocks that make up FANG+.

What’s on offer from 19th April?

The two funds that Mirae Asset MF opens on 19th April will include a FANG+ ETF and a FANG+ Fund of Funds (FoF). While investors who have a demat account could opt for the ETF, those who prefer to invest via the Mutual Fund route could go for the FoF.

“For people who are beyond the demat account segment, the fund would launch a fund of funds, which would feed into this ETF and enable people who do not have demat accounts to go buy the same fund as this FoF would have the FANG+ ETF as the underlying asset,” Mohanty said.

Should you invest?

“Investing in rear view mirror definitely makes a case for investing in US tech (stocks). But the next decade will have a different story to tell and would be a mirror image of the last decade, so it is not advisable to invest in a sectoral fund globally.” said Feroze Azeez, Deputy CEO, Anand Rathi Private Wealth.

He added that if an investor has been investing in global funds for ling periods of time, then such an investment could be made as an upgrade. He also said, “If you have global objectives, then it is a good way to accumulate (US) dollars.”

Commenting on this reaction, Mohanty said: “India (Indian investments) is not to be sold ever. It’s a country which is just getting into its own four. And then the future definitely lies with India. I have no doubt or debate about that. But when you look at portfolio construction and when you look at asset allocation, there is definitely a space for allocation to these 10 companies… Not owning these companies could become an opportunity loss. Global diversification is a good strategy. How much to allocate is a matter of further discussion.”