It’s been pretty easy to make money in stocks for the past decade. An unmissable strategy: only buy the big names in technology. Repeat over and over.
From February 2009 to last November, investors marveled as the value of the tech-heavy Nasdaq doubled, and doubled, and doubled again, and kept going up, to skyrocket from 1,400 to 16,200. That trajectory toward the moon made some sense: It coincided with a period of rock-bottom interest rates and easy-money Fed policy. Bulls saw this as a golden age of lower interest rates for longer, leading to, among other things, the TINA (no alternative) stock-picking strategy and the rise of YOLO (remember that?). merchants.
All of that must seem like a distant memory. The Nasdaq fell 5% yesterday, the worst performance of any major exchange and its worst one-day performance since last June. It is now down 22.2% this year, firmly in a bear market.
Thursday’s slide — in total, global stocks took a $1.3 trillion hit yesterday, Bloomberg calculates — was felt across the board, with large-cap tech taking a hit in particular. According to Deutsche Bank, the FANG+ index fell 6.4% on Thursday. This morning, ahead of a big jobs report, Nasdaq futures were down a quarter of a percentage point at 4 am ET.
In better times, FAANG, of course, was a handy acronym for the big tech giants: Facebook (now Meta Platforms), Apple, Amazon, Netflix, and Google’s Alphabet. Throw in Microsoft, and you had a sextet of tech darlings that lifted retirement portfolios around the world.
Well, some big names on Wall Street think it’s time to ditch that acronym, or at least rethink it, to find something of value amid all the carnage.
See this interactive chart on Fortune.com
In a note to investors, Merrill Lynch and Bank of America Private Bank investment strategists Lauren J. Sanfilippo and Joseph P. Quinlan see us in a different investment era of war and high inflation and energy transformation, one that needs a new FAANG.
“In a matter of months,” they wrote, “we have gone from pandemic to Putin; inflation infections; Big Data to Big Oil; zoom to zinc; mascara masks; Electronic commerce for electric vehicles; jabs to javelins; sanction swabs; Webex for weddings; pump drivers; Non-Fungible Tokens (NFT) to Liquefied Natural Gas (LNG); Centers for Disease Control (CDC) to the North Atlantic Treaty Organization (NATO); work from home to work from office; the cloud to cobalt; and light assets to hard assets.”
They see a new row of heavyweight killers sticking out their tongues. Out there is Facebook, Apple, blah blah blah, known as FAANG 1.0. In are the new growth areas of Ffuels, ANaerospace And Defense, ANfarming, northnuclear and renewable, and GRAMold and metals/minerals. Call it FAANG 2.0.
“This cohort is emblematic of a world that is undergoing profound change. An example of this change: energy security is now the main priority of most governments; just ask Poland and Bulgaria, which ran out of Russian gas last week. Global defense spending topped $2 trillion for the first time in 2021 and is headed higher. World food prices are at record highs. Nuclear power is ready to make a comeback; The demand for electric vehicles continues to increase. Gold is now the preferred asset of central banks thanks to geopolitics, while resource/food nationalism is rampant around the world, adding further upward pressure to metal/mineral and food prices,” they explained.
Sanfilippo and Quinlan first launched this FAANG 2.0 back in February, and the two groups’ divergent performance has only grown since then.
On the investor note, the duo don’t tip individual stocks, but you don’t have to dig very deep to find them. For example, food giant Archer-Daniels-Midland is up almost 32% so far this year, defense contractor Lockheed Martin is up 25% in the same period, and miner Rio Tinto (gold and uranium ) is up 3% year to date.
This story originally appeared on Fortune.com