The FANGs have bitten investors since the first of the year.
The most crowded trade of 2015 has become the pariah of 2016 so far. The stats show just how ugly it is: Facebook is down an unfriendly -8.8%, Amazon has booked -14% losses, Netflix streamed down -6.8% and Google is searching for a bottom as it is off -7.7%.
Now remember this is a very big hedge fund trade as well. The 2&20 crowd (that’s 2% fee on assets and 20% fee on profits) dying for some profits away from pharma and biotechs piled in mid year and ran the stocks up to the detriment of Apple, which they sold off.
Hard to believe FANG is an alternative or hedge for these funds but when you book 20% losses as a fund manager you look for green where ever you can find it.
So why are they so beat up? Valuations for one. Consensus is that revenues will fall as the economy slows, but I believe there are some of the 2&20 crowd liquidating on the sly before announcing redemptions or shutting down of the funds.
SAB Capital run by Scott Bommer announced it was closing the door after 17 years on -11% losses in 2015. But I have heard that Bommer is also unloading his $93M Hamptons house he bought at the end of 2014 to fellow hedgie David Tepper. Tepper has a home ten minutes away from Bommer and just rebuilt it 2 years ago. Funny aside Tepper used to work for John Corzine at Goldman and he bought his present house from the disgraced former NJ senator’s wife and tore it down, that was the level of hate he had for Corzine.
There’s no word on price and it seems the Bommer sale was done privately with no brokers, so maybe Bommer owed Tepper’s Appaloosa Capital some coin. Who knows?
So the Wall Street banks are beginning to report their Q4 earnings and revenue is coming in very light.
Equity and corporate bond trading is causing pain with revenue coming in 10% below last year’s levels. Goldman Sachs has already said they would be cutting 10% of its debt traders due to falling revenue. Morgan Stanley also announced cutbacks in bond trading.