(B)(N) FANG+LED

Figure 1: Was it a wardrobe failure?

Drama. The FANG stocks (Facebook, Amazon, Netflix, and Google (Alphabet)) are a phenomenon with celebrity status that could not have been better crafted in Hollywood, to which we add Twitter and LinkedIn and Tesla “The Wonder Car” among a few others that suffered breathtaking losses last week; please see Figure 1 on the right (and click on it to make it larger as required) for the cause of our latest confusion.

Of course, we’re not complaining – we bought our tickets for these stocks early and have cashed them in for more than +200% in the (B)-class portfolio since 2012 (please see below) – but what now?

And that’s a compelling question for many more than 300 pension plans and mutual funds which, against all odds and with Spartan heroism and lots of other people’s money, have mounted these stocks for more than two years.

And they haven’t learned anything new and they’re now on “Desolation Row (2015)” again and trading below their 2014 levels with no place left to go but down; nor is it the companies’s fault – the companies have a new idea and a business plan to run and why should they be ATMs and “earnings machines” for fickle shareholders with an “ownership” interest that runs by the hour?

Is there a new problem then?

There are, of course, some issues with “too high” or “too low” a stock price; if the stock price is too high, the company might find it a better business than their own to issue some new stock into that market and bolster their cash account for new projects made faster with investor money; or if the price is too low, they might buy in their own stock with their own money and who would own it then?

Or they might become a takeover candidate for somebody who thinks that they can better run them or sell them off in pieces for a quick buck; or some companies might just buy their competition and pretend that they’re growing (fake it if you can’t make it); and all of that has happened last year with high or low stock prices and struggling companies looking for customers.

As a result, we’re heavy on cash and have been stopped-out of all them but for Facebook Incorporated – maybe this week? We don’t know but we’ve tightened-up our stop/loss price and will wait for the market to tell us what they want to pay for the stocks that we own. Or have owned.

But not to worry – there are still over 270 stocks in our World Trade Portfolio that are trading at or above their price of risk and above their stop/loss prices – our new net worth – and another 470 that are trading as a (B-) and we’ve been stopped-out on those and can look at buying them back at a lower price; and at the bottom, another 900 that are running in the (N)-class in entire industries that we might want to own for the long term.

Exhibit 1: FANG+LED – Cash Flow Summary

For more on the “Glam Stocks”, please see our Posts “(B)(N) What’s A Girl To Do“, “(P&I) The Catch of the Day”, or “(B)(N) FB Facebook Incorporated (IPO)” (and try the Search Box for almost any company that you might be interested in).

And for more information and examples of the Free Market Yield and the terms that we have used above, please see our Posts “(P&I) The Dismal Equation (Ecclesiastes 9:1)” and “(B)(N) S&P 100 Volatility Risk and The Full Moon” and “(B)(N) NASDAQ 100 Volatility and The Stone Bunnies“ and for an introduction to The Barometer “(B)(N) What’s A Girl To Do” or “(P&I) The Swiss Franc Debacle“.

And for more information on real “risk management” in modern times and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary and “(P&I) Dividend Risk and Dividend Yield“, and our recent Posts “(P&I) The Profit Box” and “(P&I) The Process – In The Beginning“; and we’ve also profiled hundreds of companies in these Posts and the Search Box (upper right) might help you to find what you’re looking for, such as “(B)(N) TLM Talisman Energy Incorporated” or “(B)(N) ATHN AthenaHealth Incorporated” or “(B)(N) PETM PetSmart Incorporated“, to name just a few.

And for more applications of these concepts please see our Posts which rely on the Theory of the Firm developed by the author (Goetze 2006) which calibrates The Process to the units of the balance sheet and demonstrates the price of risk as the solution to a Nash Equilibrium between “risk-seeking” and “risk-averse” investors within the demonstrated societal norms of risk aversion and bargaining practice. And for more on The Process, please see our Posts The Food Chain and The Process End-Of-Process.

And for more on what risk averse investing has done for us this year, please see our recent Posts on “(P&I) The Easy (EC) Theory of the Capital Markets” or “(B)(N) The Easy (EC) Theory of the S&P 500“, and the past, The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
Alpha-smart with 100% Capital Safety and 100% Liquidity
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”). The Canada Pension Bond®™, The Medina Bond®™, The Barometer®™, the Free Market Yield®™ and Extreme Economics®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.