The Holy Family of Investing

In 2017 investors have been nearly worshipful of the five tech titans of the market: Facebook, Apple, Amazon, Alphabet (the parent company of Google) and Microsoft. The FAAAMily. These are the five largest US tech stocks.

Some financial writers refer to large tech as the FANG companies. They throw Netflix in as the “N”. I’m not sure why, as its tiny in comparison. Possibly, because if you took the “N” out you have a very rude word? This is a family friendly blog, so I will term it FAAAMily.

Amazingly, the five FAAAMily companies gained over a trillion dollars in market cap in 2017. About $1.03 trillion to be more exact, but what’s $20 - $30 billion dollars between friends*. That dwarfs other companies and the activities of the FAAAMily get a disproportionate amount of airtime and press. You hear about the FAAAMily all the time on investor websites. They come up at dinner discussions and we are constantly using their services.

Are they overvalued? Should you still buy? Are we at the top of the market and should you sell? As I’ve always proven wrong with anything I’ve said in terms of market timing I shall keep mute on the subject.

I do however think about these companies a lot as I have friends who run extraordinarily profitable businesses using Amazon’s logistics (hello SC!) and Facebook ads (hello SG!). I use Apple and Microsoft products everyday and I don’t need to remember a thing with Google as my second brain.

Despite our obsessions with iPhones and Likes, how many of us have more than a superficial idea of how these businesses are run. What were their major acquisitions? Their debt levels? How their executive compensation stacks up against their peers? How many iPhones did Apple sell? Is Microsoft’s rate of customer retention rising or falling? Where is Amazon growing fastest?

Annual reports are the mainstay for professional long term value investors. They are the official and final word on the company, audited and rising about the short termist opinions of controversial newscasters and journalists. Yet, so few of us shareholders who don’t have to for professional reasons, make the time to read an annual report of a company that our lives are so vested in.

If your life and business are very linked to the products and services of FAAAMily companies, I bet you will learn a lot about how they function and what their future plans are.

The report run into hundreds of pages, but you’re a smart person. You can be efficient. Pick only one FAAAMily company to start. Set aside just one hour. Don’t get overwhelmed or intimidated. Read the letter from the CEO and at least a summary of the financials. Try and ignore as much lawyer-ese as possible. If you already know a lot about a company, I promise you will find yourself enjoying the process.

It’s the quickest way to get away from the noise and the hoopla surrounding these superstar companies. Every talking head on TV only might have read one of these reports before they go on line. You actually will have, so you will a stronger base to understand the updates on the companies in the future.

To make it easy for you, I’ve linked the FAAAMily annual reports, below.

Now that we’ve dealt with the FAAAMily, I’d like to wish you from my own family for the holiday season. Here’s Sterling the hound in his best reindeer horns. I named him after the British pound which has unfortunately been languishing for a few years. Maybe I should have named him Bitcoin instead?

Image-1.jpg

That was a joke. Don’t go near Bitcoin.

Thanks and Merry Christmas!

Mallika

http://www.pionline.com/article/20171212/INTERACTIVE/171219907/tech-leads-2017-market-cap-gains

FAAAMily Annual Reports

Facebook

Apple

Amazon

Alphabet

Microsoft