SEPTICS Are Flushing the FAANGs
Published January 17, 2019
Head of Equity Strategy
Last summer, we wrote “Time to Move from FAANGs to SEPTICS?” Let’s revisit the topic.
The FAANG pack consists of Facebook, Apple, Amazon, Netflix and Google’s parent, Alphabet, which were knocking the lights out of virtually everything else in the stock market at the time.
SEPTICS is our tongue-in-cheek acronym for a handful of unloved S&P 500 industry groups.
Quite different from the FAANGs, they are a hodgepodge of industries—including packaged foods, tobacco and chemicals—that I threw together just because it made a funny acronym.
The relentless multiyear FAANG trend ended in June, though the group has bounced sharply higher in recent weeks.
Figure 1 speaks for itself.
Figure 1: Cumulative FAANG Outperformance vs. SEPTICS
Figure 2 shows the return of the two groups since we published the first SEPTICS blog post mentioned earlier. Netflix and Facebook started to buckle shortly after the post went online.
Figure 2: FAANGs vs. SEPTICS, 6/11/18–1/9/19
It Was Never About the SEPTICS
What was the genius of the SEPTICS? There was no genius. Those industry groups were selected for no reason in particular. The great thing about the SEPTICS in 2018’s second half was simply that they were not FAANGs.
Remember the first chart that showed the FAANGs outperforming by 867 percentage points before collapsing? Figure 3 shows the FAANGs against two other ridiculous, unscientifically bunched groups: the RAWFISH and DOGS.
Figure 3: FAANGs vs. a Randomly Selected S&P Industry Hodgepodge
It is basically the same chart. That’s because the FAANGs walloped just about everything over the last five years.
Figure 4 repeats the table above, only this time it has the FAANGs against the RAWFISH and the DOGS.
Figure 4: FAANGs vs. Other Industry Hodgepodge, 6/11/18–1/9/19
With the FAANGs still up by hundreds of percentage points relative to…well, relative to just about everything…fortunes in 2019 are again going to depend on whether those five stocks are working or not, and whether investors are in or out.
If the tide is going out once and for all on the high fliers, then SEPTICS, RAWFISH and DOGS—anything that populates value indexes—may finally catch some prolonged outperformance.
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About the contributor
Head of Equity Strategy
Jeff Weniger, CFA, has been with WisdomTree since 2017 and serves as the Head of Equities. He shapes the firm’s market outlook through a combination of macroeconomic and fundamental analysis. With more than two decades in investment strategy, Jeff is known for his work on market cycles and valuations. Before joining WisdomTree, Jeff was with BMO Private Bank and BMO Global Asset Management for 11 years. At BMO, he sat on the firm’s Asset Allocation Committee and co-managed ETF model portfolios across the U.S. and Canada. In 2013, at age 32, he became the youngest member of BMO’s Global Investment Forum. When he left BMO to come to WisdomTree, his final role was Director, Senior Strategist in the Office of the CIO in 2017.
Jeff is a frequent television guest on networks such as CNBC, Bloomberg, and Schwab, with regular print appearances in The Wall Street Journal, Barron’s and Reuters. He also appears weekly on the Behind the Markets podcast and is a regular on SiriusXM’s The Business Briefing. On X, Jeff has developed one of the larger followings in financial media. He earned a B.S. in Finance from the University of Florida and an MBA from the University of Notre Dame. He has held the CFA charter since 2006.