American investor and co-founder of Oaktree Capital Management Howard Marks cited the flow of money stemming from exchange-traded funds into FANG stocks (Facebook, Amazon, Netflix, and Google) as the reason for their soaring prices.
“Yes. They are great companies. But the ETFs probably have accentuated the flow of capital into those stocks,” Marks said at the Delivering Alpha Conference on July 18. “Nothing works forever. Things that are most hyped and usually the things that are most loved produce the most disappointment and the most pain.”
ETFs heavy with the FANG stocks like the Invesco QQQ Trust (NASDAQ: QQQ) and First Trust Dow Jones Internet ETF (NYSEArca: FDN) have seen their prices grow since the start of 2018–QQQ is up 10.62% YTD while FDN is up exponentially at 25.27%.
The recent earnings reports from Facebook took a toll when the company experienced its worst trading day ever last Thursday. As such, QQQ and FDN saw their prices drop–QQQ lost 3.27% and FDN lost 7.4% that day.
Furthermore, Facebook shares have plunged 18.5%, Amazon 3.5% and Netflix 11.7% since Marks made his comments. Google has been the sole gainer thus far, rising 1.4 percent.
Related: The Impending Sector Reconfiguration to S&P 500 Index
The FANG stocks have been major beneficiaries of the bull market run, but Marks said that could be coming to a close.
“Ever since the global crisis, people have been asking me, ‘What inning are we in?,'” said Marks. “Now I would say we’re in the eight inning.”
Nonetheless, he did leave the door open for a tie game with extra innings.
“However, we have to notice that this isn’t baseball and we don’t know how many innings there will be,” Marks added.
For more market trends, visit ETFTrends.com.