This has been a wild year for the market. And it’s just barely begun! But there is one group that is bulletproof …
I’m talking about FANG-Plus. And this group could point the past toward higher profits for you. At least, if you believe in the Cycle of Innovation.
What’s the Cycle of Innovation? It’s a theory by an Austrian-born economist named Joseph Schumpeter. He believed capitalism could only be understood as an evolutionary process of continuous innovation and creative destruction.
Schumpeter believed these cycles happened in waves …
He combined previous economic theories about cycles: Kondratiev (54 years), Kuznets (18 years), Juglar (9 years) and Kitchin (about 4 years). Schumpeter added them together to form a composite wave.
And Schumpeter’s theory of long cycles emphasized the initiating role of innovations.
The first wave of innovation and economic expansion was the primary wave. This was followed by a secondary wave. A whole new round of innovation which sprang from the first wave.
OK, enough boring economic talk. Let’s get to the good stuff …
Ride the Wealth Wave of the Innovation Cycle Today
Maybe you’ve heard of FANG — Facebook, Amazon, Netflix and Google. They’re the cream of the tech-stock crop.
But have you heard of FANG-Plus? That’s also called the Global FANG stocks. It includes the S&P 500 darlings — and international stocks as well. Here they are …
- Netflix (Nasdaq: NFLX)
- Twitter (Nasdaq: TWTR)
- com (Nasdaq: AMZN)
- Nvidia Corp. (Nasdaq: NVDA)
- Alibaba Group (NYSE: BABA)
- Baidu (Nasdaq: BIDU)
- Alphabet (Nasdaq: GOOG)
- Tesla (Nasdaq: TSLA)
- Apple (Nasdaq: AAPL)
- Facebook (Nasdaq: FB)
Together, this group is tracked in the NYSE FANG+ Index. And it is running rings around the S&P 500 …
That price action almost looks wave-like, doesn’t it?
And it hasn’t peaked yet.
Interestingly, some of the biggest names in tech aren’t FANG-plus. For example, Microsoft (Nasdaq: MSFT) and Cisco (Nasdaq: CSCO) are big. But they aren’t in the index. They aren’t considered innovators, either. Sorry, Mister Softee!
Going forward, I expect the FANG-plus stocks to continue to outperform. That’s simply how indexes work.
By that, I mean thanks to indexing, the humongous tech companies of FANG-plus make up an increasing share of investor portfolios. And that’s regardless of whether they buy individual stocks.
For example, Apple is 4% of the S&P 500. Anytime investors buy the leading index, 4% of the money boosts Apple’s stock.
These FANG-plus stocks should continue to lead until the next cycle of innovation begins. And then we could see a whole new flock of winners.
But for now, bet on FANG. Those stocks are beating the market. And they’ll power up your portfolio, too.
All the best,
Sean Brodrick
