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Gordon Toy

AuthorGordon Toy

DateApril 13, 2018

CategoryNews

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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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Disclaimer: This document is for the exclusive use of the person to whom it is provided by Lonsec and must not be used or relied upon by any other person. No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented in this document, which is drawn from public information not verified by Lonsec. Conclusions, ratings and advice are reasonably held at the time of completion but subject to change without notice. Lonsec assumes no obligation to update this document following publication. Except for any liability which cannot be excluded, Lonsec, its directors, officers, employees and agents disclaim all liability for any error, inaccuracy, misstatement or omission, or any loss suffered through relying on the information.

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For more information contact:

Gordon Toy
03 9623 6373
Gordon.Toy@lonsec.com.au

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