It’s not the famous FAANG big tech companies that investors should be buying as interest rates rise and the dollar strengthens, but rather MANG.
That is the view of investment bank Jefferies, where equity strategists said that with US 10-year bond yields flirting with 3%, “it might be tempting to go long bond proxies”.
However, despite wobbles in US real GDP growth, nominal GDP is “doing just fine”, which suggests to the strategists that “some patience” is needed.
As financial conditions continue to tighten, meaning “more interim pain” for asset markets and with a strong dollar inhibiting large cap tech earnings, “fortitude is required before stepping in”.
However, for those who want a place to put their money, the MANG stocks are recommended, namely Microsoft Corporation (NASDAQ:MSFT), Apple Inc (NASDAQ:AAPL), NVIDIA Corporation (NASDAQ:NVDA) and with the G from Google owner Alphabet Inc (NASDAQ:GOOG).
The strategists also noted that earnings disappointments from some members of FAANG+M (Facebook, Apple, Amazon, Neflix, Google and Microsoft) there had been a considerable derating in the share prices this year, with the “downdraft” having “not only left a dent in the S&P 500 but also came in contrast for the majority of stocks that had beaten estimates”.
To date, 81% of companies beat first quarter forecasts by 3.1%, with the S&P 500 trading on a 12-month forward price to earnings of 17.7x, a forward price-to-book of 3.7x, a forward price to earnings growth of 1.38x and a forward dividend yield of 1.58%.