Buy these stocks now to avoid the bull’s blues

Hang with the FANG: They’re easy to own and easy to dump

Check them tech stocks! Pundit-rejected during June’s swoon, they’ve roared back. Overall, the group is up about 8% since their July 3 low — nearly 25% this year.

FANG stocks: Facebook, Amazon, Netflix, Nvidia (the new N), Google (now Alphabet) and Apple all had rip-roaring summers. (Maybe the spelling should be FAANNG).

Pundits are gob-smacked! They shouldn’t be. In my June 25 column, I showed why: What works in the first quarter of presidential inaugural years routinely shines in the year’s back half, regardless of what happens in the second quarter. It’s a once-every-four-year sneaky trick. Yet 2017 soon ends. So, what should you do about FANG & Co. now?

First, the bad news: By my count, we’re roughly twothirds through this bull market, time-wise. More on that below.

But here’s the good news:

The final third of the bull run usually accounts for roughly 40% of its total rise. The best strategy is super easy — simply own big, quality, growth stocks. There is a long history of this working well from before this senior citizen was born. As most bulls mature, ever fewer stocks lead the way. And it’s these that do.

It makes no sense to most. I like that. The nonsensical surprises are what moves stocks, always. FANG & Co., huge health care and irresistible, mega consumer staples companies fit the mold perfectly. Not small, obscure high-flying needles in some haystack.

Here’s why. Think about who the last buyers are during any bull’s home stretch: folks who weren’t buying before. The last vicious bear scared and scarred them from stocks for years. But after scaredy cats feel years of high returns, the fear of missing out (“FOMO,” to a younger generation) starts nudging away fears of loss.

After long being too frightened to buy anything, what will they buy first? Not speculative needles in some haystack. They buy what they’re comfy with: huge wellknown quality firms with global footprints, super brands, diverse products and growing revenues. Newbies’ and return-a-bies’ collective bidding power pushes these stocks to outperformance.

Every stock category has its day in the sun and rain. The time for smaller, more speculative stuff comes but is surprisingly always in a bull market’s first third — including stocks that got creamed in the bear market and might have gone bankrupt if everyone’s worst fears came true.

Once-legendary investor John Templeton famously said, “Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”

After eight-plus years of stocks rising against a wall of pundits predicting they wouldn’t, optimism increasingly is normal — rational, even. This lingering “fear-of-heights” skepticism is exactly what makes the final third’s surge last longer than folks figure. It can endure for years, driving huge gains. I think we’re about halfway through optimism, having just started it last year. Euphoria? Not even! We could have four more years of bull market gains.

Do I really know how long? No! But don’t underestimate a bull. The other good news? When it’s time to finally bail, these type of stocks are easiest to sell and fall least early on in any bear market because they’re most liquid and least scary.

So hang with the FANG. These groups are easy to own and to dump when it’s time.