Tech stocks are baring their FANGs on Wall Street. According to reports, fund managers have nearly doubled their stakes in Facebook, Inc. (FB), Amazon.com, Inc. (AMZN), Netflix, Inc. (NFLX) and Alphabet Inc. (GOOG) – the so-called FANG ensemble – since 2014.

Their faith in FANG stocks has reaped splendid profits for managers. Since the start of this year, the grouping of four stocks is said to have racked up returns of 30 percent versus the 8 percent gain of the S&P 500. FANG stocks were also at the vanguard of a record 15-week inflow of funds into tech sector stocks that ended last week. (See also: Banks, Techs Will Lead 2nd Half, Strategists Say.)

The tech sector grouping encompasses multiple industries, ranging from e-commerce to video streaming to social networks. However, the common factor among the group's stocks is that they have all shown significant gains since the start of this year. Amazon is up by approximately 30 percent, as are Netflix and Facebook. Recent developments, such as Amazon's proposed acquisition of Whole Foods Market, Inc. (WFM), have also contributed to the surge in tech stocks. (See also: FANG Stocks Will Continue to Lead Market Higher.)

However, fund managers' enthusiasm for tech stocks comes with a caveat. An outflow could severely affect fund performance and trading volume. For example, the PowerShares QQQ ETF (QQQ), a fund that tracks the Nasdaq 100 Index, fell 2.5 percent after a reversal in the fortunes of tech stocks earlier this month. There is also the ever-present specter of a repeat of the dotcom bust from 2000, when companies with massive valuations were wiped out in a crash. But the situation may be different this time around. According to Jae Yoon, chief investment officer at New York Life Investment Management, P/E valuations in the tech sector are "much closer in line” with the S&P 500 this time around. (See also: Why the Tech Bubble Won't Burst Soon: Analysis.)

 

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