DateApril 13, 2018
Recent concerns over privacy and the use of data has led to falls in the price of major tech stocks, and in particular the big four FANG shares (Facebook, Amazon, Netflix and Google). As the chart below shows, valuations for these FANG stocks have been steadily moving higher since the beginning of the social media age, leading investors to consider the possibility that a second tech bubble is forming.
Price to book ratios
Source: Lonsec, Bloomberg
For fund managers, the ramifications of a social media tech bubble would be significant. According to Lonsec, Google and Facebook are among the most commonly held stocks for global active fund managers within the Lonsec ratings universe. Of 64 discretionary fund managers rated by Lonsec, 56 held positions in Google, with a median portfolio allocation of 1.6%, while 20 held positions in Facebook, with a median allocation of 1.5% (see chart below).
Top 10 commonly held shares for global active fund managers*
*Includes global active fund managers covered by Lonsec Research. Data as at 31 December 2017
Source: Lonsec, Financial Express
Given the popularity of FANG stocks and the willingness of fund managers to actively allocate towards them, a social media tech bubble would mean some fund managers take a hit to their portfolio, while reductions in exposure could result in a cycle of selling for these shares.
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