Investors looking for Big Tech exposure in this environment of rising rates may want to avoid buying the popular "FAANG" group and focus on another stock grouping instead, according to Jefferies. The yield on the benchmark 10-year Treasury note on Monday touched 3% for the first time since late 2018 and was hovering just below it Tuesday. "One of the substitutions for the U.S. Treasury trade has been to own the FAANG+M. It is a tad too early in our view," Jefferies global equity strategist Sean Darby said in a note Tuesday. The FAANG+M group includes Meta Platforms, Apple, Amazon, Netflix, Google and Microsoft. Darby noted that FAANG stocks are facing headwinds that didn't exist before the pandemic, including the base effects of earnings over the next 12 months making it harder for positive surprises. Additionally, mixed first-quarter result from the group have led to a "considerable" de-rating of the S & P 500, Darby said. Netflix and Amazon, for example, fell sharply after reporting disappointing quarterly figures, pressuring the broader market. They also have some on Wall Street questioning the group's relevance going forward . "The downdraft in the FAANG+M has not only left a dent in the S & P 500 but also came in contrast for the majority of stocks that had beaten estimates," Darby said. Instead, he said he'd the "MANG" grouping — Microsoft , Apple , Nvidia and Alphabet — based on their balance sheets, earnings yields and free cash flow yields. To be sure, the names in the MANG grouping are all down year to date — with only Apple slightly outperforming the S & P 500 on a relative basis. Apple shares are down 10.3% for 2022, while the broader market benchmark has lost 12.3% in that time.
FAANG stocks displayed at the Nasdaq.
Adam Jeffery | CNBC
Investors looking for Big Tech exposure in this environment of rising rates may want to avoid buying the popular "FAANG" group and focus on another stock grouping instead, according to Jefferies.