In 2013, CNBC’s Jim Cramer famously coined the phrase “FANG” stocks, which has since turned into a market moving acronym. Cramer was talking about the stocks Facebook (NSDQ: FB), Amazon (NSDQ: AMZN), Netflix (NSDQ: NFLX), and Google, which has since changed its name to Alphabet (NSDQ: GOOGL).

These four stocks were expected to be the big secular growth plays of the mobile age. Boy oh boy, was Mr. Cramer right. 

Since then, the acronym has evolved into FAANG, with the addition of Apple (NSDQ: AAPL) as another “A” because of its terrific performance. Apple has completely dominated the mobile phone market, pulling in the vast majority of the profits within the industry as a whole, earning its spot alongside the other tech titans. 

Over the last 5 years, these FAANG stocks have beaten the market by a wide margin. Some might even say that they’ve served as the foundation for the current bull market run. Even the “poorest” performing FAANG stock over the past five years, GOOGL, has beaten the return of the SPDR S&P 500 ETF (SPY) by more than 50%. 

Investors who’ve had exposure to these names have been happy campers, to say the least, though in October, this began to change. All of the FAANG names experienced strong sell-offs in October, causing many investors to wonder if the famed trend is over. Frankly, I am not one of them. The secular growth that made these names popular in the first place is not over and I believe that this recent bout of weakness is more likely to be a great buying opportunity than the end of an era. 

Now, that isn’t to say that these names don’t have issues. No equity is perfect. They all come with risks. However, I think that for the most part, the growth proposition offered by these companies paints an attractive risk/reward picture when looking at relative valuations. 

Even after recent weakness, I know that few value-oriented investors would be interested in owning shares of Amazon or Netflix. These two FAANG members are priced more speculatively than the rest. This has been the case for years and I think it will continue to be the case for years to come. Investors in these names don’t focus on traditional valuation metrics, so for the sake of this article, I will ignore these stocks. 

Poised to Bite Back

However, that still leaves us with three high-quality growth names trading with fundamentals that even the most conservative value investors could wrap their heads around. 

Up first, we have Facebook. This company has fallen nearly 35% from its 52-week high. This company’s sell-off started well before October. It all started with the Cambridge Analytica drama earlier in the year. The fallout from this issue has led to lost confidence and the rate of selling has seemed to steepen in recent weeks. 

The market is concerned about Facebook as the company invests heavily into security measures, greatly increasing its headcount and therefore, its capital expenditures (capex), which is causing its earnings growth to slow. When you add this slowing earnings growth to threats of user growth issues and potential government regulation, there should be no surprise that shares are down. 

After recent weakness, Facebook shares are now trading for less than 20x earnings and I still believe that the company has long-term double-digit earnings per share (EPS) growth potential. Facebook’s current price to earnings ratio (P/E) is sitting at its lowest multiple ever. It’s rare to have an opportunity to buy blue chip growth stocks like Facebook at all-time lows. I don’t think investors should take this opportunity lightly. 

Alphabet is another tech name that has been caught up in the regulatory fears. Alphabet is the global leader in mobile/Internet search. It’s also a major player in the Internet television space with its YouTube platform. Alphabet is a global leader in the cloud and security markets. The company is making great strides in artificial intelligence. It’s also dipping its toes into health care and appears to be a leader in the driverless car space with its Waymo segment. 

Needless to say, Alphabet has a lot going for it. With this in mind, I think the market’s recent 19% sell-off will prove to be irrational. GOOGL shares are trading for 25x earnings, which is well below their long-term P/E average of roughly 30x. 

Like Facebook, Alphabet has long-term double-digit EPS growth potential. What’s more, the company has one of the world’s largest cash hoards and a nearly pristine balance sheet with a AA+ Standard and Poor’s credit rating. This is the type of quality company that I look to buy into weakness. 

And lastly, we arrive at Apple. Apple shares held up great throughout much of the October weakness, but more recently they’ve sold off roughly 20% in response to changes that the company announced during its recent earnings report. Apple management said that they will no longer report hardware sales units moving forward. Some saw this as a dubious move. We all know the market doesn’t like unexpected change. However, I think the sell-off in response to this announcement is short-sighted and patient AAPL investors will be rewarded. 

Apple just reported revenue growth of 20% and earnings growth of 41%. Apple’s EPS is expected to rise some 30% in 2018, followed up by double-digit growth years in 2019 and 2020 as well. With this in mind, the fact that the company is currently trading for less than 14x forward earnings seems silly. 

Furthermore, Apple is returning over $100 billion to shareholders in the form of a growing dividend and shareholder buybacks, giving patient investors even more reasons to hold onto their shares.

Simply put, when it comes to these attractively valued FAANG names, I continue to be very bullish. These stocks have made investors boatloads of money in the past and I have no reason to believe that this trend will change moving forward. To me, this seems like a perfect “buy when others are fearful” set up.

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