‍About: Investoom Weekly is the newsletter by the market intelligence company Investoom that provides AI-powered investment insights through social sentiment data, onchain data and financial data. Investoom democratizes the access to hedge fund insights.

Overview of the topics

• Stocks Highlights: From the beginning of the year the best performer of the FAANG is down 16.60%.
• Social Data: While Apple is considered to be the safest FAANG, Meta and Netflix are perceived as riskier.
• Financial Data: The stock that holds the highest percentage in the Bill and Melinda Gate Foundation’s portfolio has remained MSFT.
• Onchain Data: Since 2021 BTC prices have shown a high interdependence with the stock market.
• Deep Dive: Senior ECB staffers Bindseil and Schaaf criticized Bitcoin for being a hotbed for illegal transactions.

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Stocks Highlights

FAANG performance is slowing down

It has been a shattering year for Silicon Valley-based companies. From January the best performer of the FAANG, Apple (AAPL), is down 16.60%. Meta (META), the company owned by Mark Zuckerberg, Amazon (AMAZN), Netflix (NFLX), and Alphabet (GOOGL), controlling Google, showed heavy losses.

Meta is the company that had the worst performance. From the beginning of 2022, its stocks have lost 66.88%. From July to September its sales shrank by 4% to $27.7 billion, and its profits halved. However, the fall in Meta shares has wiped $78bn off the company’s market cap. The reason is that, even if Zuckerberg said that virtual reality would have guided Facebook’s growth, it has not happened. The company is also suffering from the reduction in advertising budgets, changes in Apple’s settings, and competition from its rivals, mainly TikTok.

The other big companies on the NASDAQ, such as Microsoft (MSFT), Nvidia (NVDA), and Tesla (TSLA) lost between 20% and 45% in 2022. Their trend follows the course of the S&P 500, which from January is down 20%.

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Social Data

What’s the history behind FAANG stocks?

The acronym FANG stands for the most famous American tech companies: Meta, Amazon, Netflix, and Alphabet. The word was coined in 2013 during a CNBC broadcast held by Jim Cramer, Mad Money. In 2017, analysts added Apple, transforming the FANG into the FAANG. However, in 2021, following the strong performance of Microsoft on the stock market, Cramer proposed to replace Netflix with Microsoft, creating a new acronym: MAMAA.

The FAANG stocks have become important because of their outstanding performances. Between 2013 and 2021, NFLX grew by +4,500%, AMAZN by +1,176%, META by +1,190%, MSFT by +1,210%, AAPL by 1,000%, and GOOGL by +720%. Today, they are all listed on the NASDAQ and included on the S&P 500, an index that assembles the 500 leading companies of the American market.

Since MAMAA’s stocks account for 20% of the S&P 500 value, they have a great influence on the performance of the index. However, the situation got worse throughout the past year. Fed rate hike announcements, lockdowns in China, and the invasion of Ukraine scared the international stock markets. The rise in competition weighed particularly on Meta. In the last quarter of 2021, its users decreased by a million, and its shares collapsed by -43.89%.

The users’ loss is also due to the growth of TikTok, the biggest competitor of Meta, which has become extremely popular among teenagers. However, in 2021, the worst performing FAANG was Netflix. When the streaming giant announced the loss of 200,000 subscribers and the reduction of market share in favor of competitors, its shares plunged by -25%. Today, the crash is continuing.

Nowadays, most of the FAANG stocks have plunged more with respect to the S&P 500. However, some of them are in stronger positions; Apple ranks as the safest stock among the group, as it’s the only one outperforming the S&P 500 throughout the year. Indeed, the company reported solid revenues and earnings during the fourth quarter of the year. Besides Apple, Alphabet and Amazon are still considered good investment choices.

On the contrary, Meta and Netflix are among the “riskiest” FAANG stocks. While Meta is massively spending on its metaverse projects, Netflix is facing intense competition in the streaming sector. However, the stock market as a whole is still affected by the current macroeconomic situation, according to American investors.

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Financial Data

MSFT has 27.9% of the Gates’ portfolio

Bill Gates, the fourth-richest person in the world, has actually a net worth of $129 billion. As a consequence, the Bill & Melinda Gates Foundation has a massive investment portfolio, which according to the latest 13F filing stays above $17 billion. Actually, the foundation mainly holds 19 stocks, belonging to companies with competitive advantages, that grow the dividend payouts over time.

But how many MAMAA stocks are in the portfolio? The stock that holds the highest percentage in the Bill and Melinda’s Gate Foundation portfolio is Microsoft (MSFT). Actually, it represents 27.9% of the stocks possessed by the foundation. However, the company, founded in 1975 by Bill Gates and Paul Allen, is the only one included in the group.

The absence of the majority of the MAMAA stocks can be due to his diversification strategies. If we think of the MANTA companies, that include Tesla as well, we can note that in May Bill Gates shorted its stocks and was accused by Elon Musk to damage his environmental credibility. The founder of Microsoft, however, replied that he was just diversifying his investments. He also added, “The popularity of electric cars will lead to more competition for selling those cars, so there’s a difference between the adoption of electric cars, and companies becoming infinitely valuable”.

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Onchain Data

Are BTC prices following FAANG prices?

Since 2021, the prices of BTC have shown a high interdependence with the stock market, in particular the NASDAQ. In May, the correlation even reached a peak of 0.80, but things got worse. Even if in the past months the relationship weakened, when the investors operating in the crypto market pulled out their assets to manage the increasing risk, in October they returned to a correlation of 0.50.

From the beginning of the year, indeed, the BTC price movement has heavily mirrored the S&P 500 and the NASDAQ, heavily weighted toward tech companies, such as the FAANG. Concurrently, it has diverged from fluctuations in the prices of gold, the asset with which it has been always compared.

Is Bitcoin still a hedge against inflation? During the past years, cryptos have become increasingly dependent on the worldwide macroeconomic situation. It has happened in a period in which the current inflation rate, the fear of recession, and the decrease in purchasing power are pushing investors toward an alternative to cyclical assets. Unfortunately, the bear market has caused BTC prices to go 75% below the all-time high.

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Community

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News of the week

• BTC: European Central Bank says bitcoin is on the ‘road to irrelevance.[Read more]
• ETH: Ether Drops as Large Investor Moves 73K ETH to Binance. [Read more]
• Twitter: Trump snubs Twitter after Musk announces reactivation of ex-president's account. [Read more]
• Exchange: Binance re-enters Japan with Sakura exchange purchase.[Read more]

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About

Investoom is a Munich-based Fintech Startup democratizing the access to quantitative investment insights that are used by big hedge funds, but are inaccessible to retail investors. We are a market intelligence company that provides AI-powered investment insights through social sentiment data, onchain data and financial data.

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