Out With The FANG, In With The DEAF?

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Includes: AAPL, AMZN, DIS, EQIX, FB, GOOGL, IBM, NFLX, YHOO
by: Dana Blankenhorn

Summary

Some of the FANG stocks seem to be stuttering.

New names like Equinix, Disney and Apple are all starting to move.

So drop FANG for DEAF?

It has been over a year since the acronym FANG became "the way" to make money in stocks.

Betting on Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOG) (NASDAQ:GOOGL), since renamed Alphabet, certainly looked like easy money then. If you bought, you have made easy money since. Netflix is up 71% over the last year, Amazon 61%, Facebook 38% and Google 38%, despite the plunge earlier this year that clobbered the two highest fliers, Netflix and Amazon.

But everyone's glory days end. No "system" lasts forever. And it may be time to retire some of FANG to the shelf and look elsewhere for profit.

Right now, I'm especially concerned about Netflix and Google. Netflix needs to increase its Average Revenue Per User (ARPU), as its revenue growth has to slow if it tries to maintain the $8/month price point and rely on subscriber growth only. Google, as I've written elsewhere today, is starting to look tired, lazy, consumed by a mid-life crisis with "moonshots" that are sputtering on their launchpads, the continuing failures at Google Plus, the unwillingness of YouTube to go beyond its ad-supported, short-video model, and laziness at sites like Google Finance, which is being crushed by (of all people) Yahoo (NASDAQ:YHOO).

Other people can tell you why not to continue with Amazon. I remain bullish on the company. And while I still don't own any Facebook (because I hardly ever use it), this is the most-respected member of the group at the present time, gauging from analyst chatter.

But where else can you go, if not here?

Apple (NASDAQ:AAPL) is starting to look better. I never understood it having an IBM (NYSE:IBM) Price/Earnings multiple, and it seems to be turning up the dial from 11. Many have underestimated the value of its service revenue, I suspect they're underestimating the Apple Watch, and face it, the numbers remain huge. Even if growth slows, even if it backs up for a quarter or two, it's still worth more than its present price, if only for the cash.

I've written before about Equinix (NASDAQ:EQIX), the best cloud stock not named Amazon. This is the best way I know of to play the hybrid cloud market, because Equinix is an important "arms merchant" here, providing and maintaining fast connections between private and public clouds.

Disney (NYSE:DIS) also looks woefully undervalued here. Do you know it's down nearly 7% for the year despite the success of "Star Wars," and despite the fact that its Shanghai theme park isn't in the numbers yet? No company knows better how to profit from popular content than the "mouse house." I suspect the worries about ESPN and its ABC network are overdone. There is over $4 billion in cash, and the company knows how to do acquisitions (Despite ending its distribution deal with the company, I'd put Dreamworks (NASDAQ:DWA) in the frame).

So Disney, Equinix, Apple, Facebook? Maybe I'm just DEAF. But in a market more concerned with safety than absolute growth that sounds like a good acronym to play.

Disclosure: I am/we are long AMZN, GOOGL, AAPL, DIS.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.