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Felix Wintle
Fund Manager
One of the best places to have had your capital over the last 7 years has been in the mega cap tech names. The group picked up its own acronym, FANG, Facebook, Amazon, Netflix and Google, in 2013
and symbolised a group of companies that totally dominated their end markets. The Four Horsemen of growth. These stocks started off their period of outperformance as mere large caps but grew
quickly to become mega caps (> $200bn in market cap) and added to the throng more recently were Microsoft and Apple to become known as FANMAG and now total almost $8tr in market cap and
form over 22% of the S&P 500.
The question for investors is, are they still a good place to be invested in now? As can be seen below, the group has underperformed the S&P 500 in recent months, having peaked relative in July 2020.
This is not necessarily a reason to sell, as the group has gone through periods of consolidation before and these are quite natural. However there are other factors to consider. The first being the fact that these stocks are very well owned by investors and feature widely in passive and active funds. The second is that there has been a broadening out of performance as the market has started to price in a post Covid recovery. The rebound in the Russell 2000 index is the best example of this, having risen by almost 50% since July. This can also be seen by looking at the equal weight S&P 500 which has been outperforming its market cap weighted cousin, since the summer. The ‘average stock’ has performed better than its much larger counterpart.
Is this underperformance set to continue? We believe so. As investors continue to rotate their exposures to account for the rising 10 year bond yield, the post Covid recovery and the return of
inflation, mega cap tech is likely to continue to be a source of funds.
We are finding plenty of interesting new ideas further down the market cap spectrum and do not own any of the FANMAG group of stocks.
WARNING: All information about the VT Tyndall North American Fund(‘The Fund’) is available in The Fund’s prospectus and Key Investor Information Document which are available free of charge (in English) from Valu-Trac Investment Management Limited (www.valu-trac.com). Any investment in the fund should be made on the basis of the terms governing the fund and not