Excessively crowded positions in tech stocks should worry investors, according to Barron's. These include the so-called FANG stocks, Facebook Inc. (FB), Amazon.com Inc. (AMZN), Netflix Inc. (NFLX), and Google parent Alphabet Inc. (GOOGL). A prime example of a sell signal for contrarian investors, Barron's says, is when 90% of the analysts for a given stock have "buy" ratings on it, while only 2% recommend that investors "sell." That is exactly the case with Amazon, Barron's notes. The article also points out that institutions have 25% of their fund weightings in tech, versus a benchmark allocation of 22%, citing research by Goldman Sachs Group Inc. (GS).

Remember September

Meanwhile, the Dow Jones Industrial Average (DJIA) has fallen in 60 of the last 100 Septembers, posting an average decline of 1.1%, according to Bespoke Investment Group, as cited by the Journal. Regarding the S&P 500 Index (SPX), Renaissance Macro Research finds that it has averaged a loss of 0.67% in Septembers from 1962 onwards. (For more, see also: The Cruelest Month: September Could Hammer Stocks.)

FANGs Take Flight

Since the S&P 500 bottomed out on March 9, 2009, the FANGs have risen dramatically in price through the opening on September 5: Amazon by 15.7x, Netflix by 31.8x, and Alphabet by 6.3x, per Yahoo! Finance. The S&P 500 is up 3.6x over the same period. Facebook's opening price on Tuesday was 4.5x its May 18, 2012 initial public offering (IPO) price of $38 per share. 

The respective forward P/E ratios on these stocks are, as of September 5: Facebook, 26.4; Amazon, 121.5; Netflix, 86.0; and Alphabet, 23.5, also per Yahoo! Finance. The forward P/E ratio on the S&P 500 was 18.9 and that on the tech-heavy Nasdaq 100 Index was 21.6, per a weekly computation by Birinyi Associates as of September 1, as reported by the Wall Street Journal. Institutional holdings of these stocks are large percentages of their market float, per data from Thomson Reuters as reported by Yahoo! Finance: Facebook, 69%; Amazon, 68%; Netflix, 88%; and Alphabet, 79%.

Contrarian Plays

Value investor William Smead, of Smead Capital Management, advises investors to ignore the hype about how online merchants are set to bankrupt all brick-and-mortar retailers. He finds the pessimism to be excessive, telling Barron's that investors should "go long the most successful retail stocks that straddle both online shopping and physical stores." Two retail stocks that he owns, rating them "survivors and thrivers," are Nordstrom Inc. (JWN) and Target Corp. (TGT).

Darren Pollock, chief investment officer of Cheviot Value Management, suggests General Electric Co. (GE) to Barron's as his contrarian pick. GE, a long-term underperformer, is trading near a four-year low, but Pollock likes the nearly 4% dividend yield and a below-market P/E ratio (its forward P/E is 14.4 per Yahoo! Finance). He anticipates a turnaround under new CEO John Flannery, with an added positive being the involvement of activist investor Nelson Peltz, whose Trian Fund Management owns nearly 1% of GE. Pollock sees GE rising to the mid-$30 range in the next two or three years; it opened Tuesday at $25.06.