Ruchir Sharma

GIVEN the battering markets have dealt so far this year to tech stocks, led by the Faangs, it is worth stepping back and recognising what is coming apart: the whole concept of acronym investing.

The unbundling of the Faangs is much like the fall of the big emerging markets, known as the Brics, a decade ago. A hot theme seizes the imagination of investors. Marketers coin an acronym to capture the trend and it works well for a while. Emboldened, people start piling on, deriving similar acronyms. As the trend matures, its fundamentals deteriorate. Many names start to show serious flaws but, instead of rethinking, investors keep rewriting the acronym. In the end, few if any of the original prospects are left with a mass following.