The FANG stocks, Facebook Inc. (FB), Amazon.com inc. (AMZN), Netflix Inc. (NFLX), and Google parent Alphabet Inc. (GOOGL), have led the decade-long bull market and thus receive outsized attention from investors and market watchers. However, several "old tech" stocks have outperformed the FANGs handily in 2019, per a detailed report in the Financial Times summarized below.

Those "old tech" stocks are Microsoft Corp. (MSFT), Intel Corp. (INTC), Apple Inc. (AAPL), German software giant SAP SE (SAP), Dutch semiconductor manufacturer ASML Holding NV (ASML), and Japanese sensors and instruments maker Keyence Corp. (KYCCF). "Old tech has been an opportunity hiding in plain sight," as Christopher Harvey, head of equity strategy at Wells Fargo Securities, observed in a note cited by the FT. These stocks "have been chronically under-owned because the average large-cap portfolio manager no longer considers them ‘growth’ companies," he added.

Key Takeaways

  • Several older tech companies are outperforming the FANGs.
  • These stocks are Apple, Microsoft, Intel, SAP, ASML, and Keyence.
  • Still, it is misleading to generalize about "old" vs. "new" tech.
  • Some "old techs" struggle, while Facebook is still a market leader.

Significance for Investors

Amazon is the oldest FANG company, founded in 1994. The "old tech" companies listed above are more mature by 10 to 26 years: 1984 founding for ASML, 1976 for Apple, 1975 for Microsoft, 1972 for SAP and Keyence, and 1968 for Intel.

Harvey notes that the FANGs generated an average total return of about 23% year-to-date in 2019 through October, while Microsoft, Intel, and Apple averaged 42%. SAP, ASML, and Keyence returned 40%, 78%, and 33%, respectively, per Nicholas Colas, co-founder of DataTrek Research.

The NYSE FANG+ Index, which also includes Alibaba Group Holding Ltd. (BABA), Nvidia Corp. (NVDA), Tesla Inc. (TSLA), Baidu Inc. (BIDU), and Twitter Inc. (TWTR), has been a market leader over the past 5 years, up by 184% versus 51% for the S&P 500. However, this group has lagged during the last 6 months, down by 1.1% while the S&P 500 soared to new record highs.

"The aversion to 'old tech' has created an opportunity, and non-consensus investors have been the beneficiaries," Harvey indicated. "Yet positioning suggests the opportunity has not been closed out," he added.

Jim Paulsen, chief investment strategist at The Leuthold Group, has a similar view. "Fangs are suffering from being over-owned and over-loved, and several are now facing regulatory problems. They’re now the new financial companies, having to testify to Congress," he said.

Each company has a different dynamic, so blanket statements about "old tech" versus "new tech" can be highly misleading. Other "old tech" stocks, notably International Business Machines Corp. (IBM) and Oracle Corp. (ORCL), have tracked the broader market during the past year. Meanwhile, despite increased public and regulatory scrutiny, "new tech" Facebook is up nearly 2.5 times more than the S&P 500 over the past year.

Looking Ahead

Intel stock has surged by 30% since a recent low in intraday trading on Aug. 23, at which point it was down by 4.5% for the year. Intel beat Q3 estimates for revenues and earnings, and issued full-year guidance above the consensus.

Microsoft and SAP also beat Q3 estimates for revenues and earnings. Both saw cloud computing revenues jump by 36% and 37%, respectively, year-over-year. SAP projects that its cloud revenues, 26% of the Q3 total, will triple from 2018 to 2023. Microsoft indicates that its Q4 revenue may be as much as 2.4% below the consensus estimate.