The Fairest of The FAANG: Special Report on the Tech Generals

On August 9, 2011, Apple became the largest company in the world by market cap when it briefly exceeded Exxon-Mobile for the first time. This marked the beginning of the golden age of the FAANG when their invincibility was assumed, and anything but a positive earnings surprise was out of place. Of course, the names did very well in the post-pandemic period as the digital transformation was accelerated, and the wide moats of the Tech generals provided some respite from new risks. In the 2010s, the companies had an air of invulnerability that has now since been shattered. Anti-trust concerns, the concentration of key revenue drivers, and waning customer loyalty because of reputational issues have been headwinds for Technology. To add to these headwinds, both sides of the political spectrum have issues with these prodigious firms.  The Golden Age may be over, but that doesn’t mean these stocks aren’t still good places to put your money to work.

Let’s fast forward to today. When the liquidity from the most accommodative Fed policy in history was turned with Fed tightening, multiple compression began in names with high P/Es, and the almighty tech firms were not spared. On May 11th, Apple was superseded by Saudi Aramco as the world’s most valuable company when Apple’s market cap dropped below Aramco’s briefly because of the carnage in markets. Since the lows the company experienced in the last months, it has quietly rallied 16%. So, this earnings season is a juncture for Technology. Will the multiple compression continue after the recent relative strength? Or will the Generals regain their allure and supremacy? Our research heads have started to see Technology as a place where relative strength is likely in the coming months, and we wanted to do a deep dive on these names for our subscribers. We did a piece on the intangible value of Big Tech back in May available here, but we wanted to expand.

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