Morningstar Minute - Fund picks bullish on the FAAANs

Facebook, Amazon, Apple, Alphabet and Netflix now make up about 10% of the S&P 500 index, but these Morningstar medallists want more.

Jeffrey Bunce, CFA 26 July, 2017 | 5:00PM

 

 

Facebook, Amazon, Apple, Alphabet and Netflix are five stocks that have been powering the U.S. equity market for some time. Year to date through July 18, the FAAANs, as they are affectionately known, have risen an average of 36% in U.S. dollar terms, while the S&P 500 has increased 11%. These stocks now make up about 10% of the index and account for about a quarter of the index's 2017 year-to-date return. One way to avoid missing out is by simply owning a cheap S&P 500 index ETF. However, if you're particularly bullish on these stocks or want an active manager's expertise to negotiate these high-growth, high-valuation names, then a couple of funds on offer, with Morningstar analyst medalist ratings, may be the worth a closer look.

First up is the Silver-rated TD U.S. Blue Chip. This fund is sub-advised by the U.S. mutual fund giant T. Rowe Price and has long had a bullish stance on the FAAAN stocks. Its current top three holdings are Amazon, Alphabet and Facebook. Both Amazon and Alphabet have been holdings in the fund since 2004, while Facebook has been a holding since late 2012. It also counts Netflix and Apple as current holdings. All told, the fund has 22% in these names which has helped propel the fund to the top of the U.S. Equity category for the year to date.

Not far behind in terms of performance for the year is the silver-rated Sun Life MFS U.S. Growth fund. Sub-advised by MFS Investment Management, another U.S. mutual fund heavyweight, this fund also counts Alphabet, Facebook and Amazon as its top three holdings and also has positions in Apple and Netflix too. Here, the FAAANs add up to about 20% of the portfolio and account for a good portion of the fund's value-add year to date.

Overall, both funds benefit from experienced managers and deep analyst teams and are well-positioned to make active calls on these five popular stocks.

For Morningstar, I'm Jeff Bunce.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alphabet Inc A1,178.55 USD0.79
Amazon.com Inc1,792.21 USD0.91
Apple Inc206.41 USD2.31
Facebook Inc A183.59 USD0.55
Netflix Inc302.80 USD2.38

About Author

Jeffrey Bunce, CFA

Jeffrey Bunce, CFA  Jeffrey Bunce, CFA, is a senior investment analyst for Morningstar’s Investment Management group.