Start the conversation
The NASDAQ Composite is on fire – just off its all-time highs, but heading back in that direction in a hurry.
Whenever this happens – and it never fails – out come the skeptical analysts and professional bears to make gloomy claims about how it's "too late" to buy into the mighty FAANGs: Facebook Inc. (NASDAQ: FB), Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN), Netflix Inc. (NASDAQ: NFLX), Google/Alphabet Inc. (NASDAQ: GOOG), and for good measure, Microsoft Corp. (NASDAQ: MSFT).
First, let me say, no, it's most definitely not too late to own these stocks. There's a reason the bears come out when the NASDAQ hits a high – and I'll tell you why today, so you know what to do next time the "experts" tell you these stocks have run their course.
Here's What Bothers Those Bashing Bears
We're bombarded with not-so-great news about the FAANGs and, more broadly, Big Tech as a whole, almost constantly now.
Their valuations are peaking… they're ultra-concentrated… they're under attack from boycotts… regulators and politicians are out for blood.
Turn on any news channel, wait three minutes, and you'll hear something like this…
Amazon and Google face intense regulatory scrutiny for possible anti-competitive business practices in the United States.
Netflix now must compete with hard-charging mega-rivals – including the aforementioned Amazon – in streaming video, and at the same time, they're piling on debt to produce original content.
European regulators recently announced investigations into anticompetitive practices at Apple's App Store and its payment platform, Apple Pay. It's been rumored the U.S. Department of Justice has been investigating Apple over the same issues.
Facebook is under pressure from a multibillion-dollar advertiser boycott they say is just temporary, and it's feeling the heat from the White House, which is claiming Facebook is stifling conservative viewpoints.
Both Facebook and Google have seen a sharp drop in advertising spending since the coronavirus pandemic began. At the same time, hard-charging broadcasters are lowering ad costs to attract advertisers rapidly paring back advertising budgets. According to The Wall Street Journal, U.S. advertising spending is expected to fall by 13% this year. That's dramatically lower than an expected rise of 4% in the 2020 forecast back in December.
Underlying all those issues the FAANGs face, profits at these tech giants have fallen along with the rest of the market, according to Societe Generale's Albert Edwards.
Taken as a whole, those don't sound all that encouraging, but here's the big thing, the context everyone seems to be missing: Aside from coronavirus-related problems, which will, one way or another, sooner or later, subside, there's very, very little new news in any of this.
Regulatory hassles are constant for Big Tech and have been for 15 or 20 years now. Boycotts and dissatisfaction have been, too, as has political heat from left and right.
And yet, through it all, these stocks have managed to pile on profits with little interruption.
You can count me as one of the much stronger bulls here…
We're in for (Another) Bull Stampede in Tech
All the products and services Facebook, Apple, Amazon, Netflix, Google, and Microsoft offer, from cloud computing, to social networking, to online shopping, to hardware, software, apps, entertainment, and ecosystems, have been in high demand by billions of consumers the world over.
Not only are they all brand leaders, but they mostly invented or bought outright the products and services they sell.
That's why they've exponentially grown their customer bases, their revenue, their profits, and their cash hordes. That's why their stock prices have soared.
And, they've become more – not less – appealing since the coronavirus pandemic erupted. The FAANGs have all benefited from higher demand for their products and services because of the pandemic.
As far as their stocks, the group are all now viewed as defensive plays, according to Kirk Hartman, president and global chief investment officer at Wells Fargo Asset Management.
Fund managers love the mega-tech stocks and keep buying them as they go higher.
That's forcing portfolio managers not adequately exposed to their stellar performance to play catch-up by applying sidelined cash to them as they go higher, helping them reach new heights… again, and again, and again.
I'll let you in on an open secret on Wall Street: Warren Buffett's holdings in Apple account for 43% of Berkshire Hathaway Inc. (NYSE: BRK.A)'s portfolio value.
The leading companies in Big Tech are also leading in trends like artificial intelligence, 5G wireless technology, and big-data analysis, which will continue to boost their profits and their stocks for decades to come. (Speaking of 5G, when you get a minute, click here to view my colleague Michael A. Robinson's research on a $10 billion FCC initiative that could transform Internet itself.)
So, no, it's not too late to buy the FAANGs and Microsoft. In fact, if you believe, as I do for a certainty, in the adage "the trend is your friend," then you must own these companies.
And here's another open secret: If you want to own them and ride them higher without paying the sticker price, there's an easy way to do that.
The Winners Take It All
I'm talking about selling puts. Now, you may associate the word "put" with "make money on the way down," but bullishly selling puts is very, very different than the bearish strategy of buying them.
That's a critical distinction: You want to sell puts here.
By selling put options at strike prices 5% to 10% below where they are trading, an investor would get to keep all the money they receive for selling puts if all the stocks keep going higher or stay where they are.
If the stocks fall, an investor who wants to buy all of them lower would get that opportunity if they fall at or below the strike prices of the puts you sell.
Since they're all long-term, must-own stocks, forcing yourself to buy them lower and cheaper is a great way to commit to your financial future.
For good measure, because they're all great stocks, I'd keep selling puts on them to keep collecting free money – or better yet, hopefully end up buying more shares in all of them at lower prices.
The profit potential in options trading is incredible, and I think my colleague Andrew Keene is one of the best trading experts. He hosts a live trading room – full of his top research – once a week, every week. Andrew also sends these weekly S.C.A.N. alerts to let his subscribers know about new potential trade opportunities. Click here check out what Andrew has to say…
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.