Generally speaking, “buying on the dip” is a smart strategy…and no stocks are more famously taking a dip lately than the “FANG” stocks: Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) and Google (NASDAQ:GOOGL). So let’s take a look at what’s going on beneath the surface.
One factor that I always use to assess a stock is buying pressure. In other words: Is the stock experiencing positive momentum from big money on Wall Street rushing in? Or is this “smart money” rushing out?
In the stock-rating system I developed at the beginning of my career — and is responsible for my greatest buys over the years — buying pressure is key. It is, essentially, what my proprietary Quantitative Score tells you. Here’s a snapshot from my Portfolio Grader so you can see exactly how the FANG stocks measure up:
The talking heads on TV are still happy to shout all day long about these stocks – good or bad – as long as people continue to tune in. But, as you can see above, most of the FANG stocks have seen better days in terms of their buying pressure.
Fundamentals count, too — they play a big role in a stock’s rating, as they have a significant impact on its long-term success. And FB stock and GOOGL stock look particularly weak at this time.
I am proud to have been an early bull on Google, just a few months after it IPOed, when its earnings growth caught my eye. But nowadays, well…GOOGL stock’s Report Card tells a very different story:
Still today, the sales growth is fairly strong. But earnings, not so much. With negative earnings surprises, subpar earnings growth and extremely poor earnings momentum – it’s no wonder GOOGL stock is suffering downgrades from Wall Street analysts.
FB stock is seeing a similar disconnect. Social media might run the world, but when it comes to your stocks, you’ve got to think not as a consumer, but as an investor. And Facebook’s fundamentals simply aren’t up to snuff at this time. Portfolio Grader tells the tale:
If you go off of Facebook’s sales growth, you might be tempted. But take a look at that earnings data. You can’t forget the negative earnings surprises, (lack of) earnings growth and terrible earnings momentum when you’re making your buying decision on FB stock. (That’s even before you get to the weak operating margin growth and cash flow.)
At times like this, it pays to do your homework on these stocks. The “gurus” on TV might be shouting down FANG stocks now, when they’ve plunged well off their highs. But soon they might be singing a very different tune. However, in the long run it never pays to buy into this hype.
Ultimately, if I owe my own success to anything, it’s my commitment to momentum and fundamentals — not hopes and dreams. And Portfolio Grader will help you stay focused on what counts.
At the end of the day, what you want is growth. And if you’re looking for growth, you can’t go wrong with highly rated growth stocks in big megatrends. That’s where GOOGL stock was when I was among the first to recommend it, nearly 15 years ago. And I see similar opportunities today.
I’ve got much more for you on my proven stock-picking system and what it’s turning up today. Go here to get the details.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.