HOW EXTRAORDINARY ARE THE FANMAG STOCKS?

As you are no doubt aware, a handful of large US technology stocks have had a pronounced effect on the stock market over the last few years.  Facebook, Amazon, Netflix, Microsoft, Apple, and Google have all had well-above market returns, resulting in much higher than average recent returns on the S&P 500 and other growth-like portfolios.  Smaller stocks, lower-priced value stocks, and international stocks have done OK but their returns have not compared to the high-flying results of US large growth companies.

I have heard investors say that “we’ve never seen anything like this before” and “it clearly shows that the market environment we are in is much different from anything we’ve seen in the past.”

Recent research by Dimensional Fund Advisors shows that not only is this not the case, that in fact these stocks have not even done as well as we would have expected them to based on their %-rank amongst all individual stocks in the last several years.  Take a minute to read the research article by clicking here.  Don’t hesitate to reach out with any questions or comments.

For Servo clients it’s important to remember that we do in fact hold these stocks as part of our diversified portfolios, but not at the same weighting as the overall market.  Remember our mantra about diversification: we will never own enough of any one thing to make a killing in it, nor will we own enough of any one thing to get killed by it.  

–EN