The Best Way to Play the Facebook Panic (it’s not Facebook stock)

By Michael Foster

120 billion dollars.

ThataEURtms how much market cap Facebook ( FB ) dumped over the side in a single day when the company crushed Wall StreetaEURtms hopes with a soft second-quarter earnings report last week.

This was the biggest single-day loss in US stock-market historyaEUR"and the stock has plunged more since, to a loss of over 20%.

aEURoeFacebook FrightaEUR Spreads Like Wildfire

The panic has spread to FAANG land, with Amazon ( AMZN ), Apple ( AAPL ), Netflix ( NFLX ) and Alphabet ( GOOG ) all showing losses right after FacebookaEURtms report, even though many of these companies have very different business models than Facebook. And the one thataEURtms closest, Alphabet, recently reported a blowout quarter.

For contrarians like us, this is an opportunity.

If you want to find the most efficient way to take advantage of an overly fearful market, you need to sniff out inefficiencies and pounce on them. And thereaEURtms a huge inefficiency that can hand us huge returns while we wait for the market to come back to tech.

That opportunity lies in the BlackRock Science and Technology Trust (BST), a small closed-end fund (CEF) with just $696 million in assets that often flies below investorsaEURtm radar.

If youaEURtmre a regular reader of my CEF Insider service or my articles on Contrarian Outlook, you know IaEURtmm a big fan of BST, even though itaEURtms been priced at a premium to its net asset value (NAV) for a while.

What makes this fund a standout?

Simple: it crushes its benchmark, the Invesco QQQ Trust (QQQ), a aEURoedumbaEUR index fund that many investors like for its low fees. But that doesnaEURtmt matter, because BST has blown QQQ out of the water over the last three years, even with these costs included (demonstrating yet again the dangers of getting too caught up in CEF fees):

BSTaEURtms Human Managers Earn Their Keep

Has that changed in the last few days, now that the tech sector has faced a rout of panic selling?

Yes and noaEUR"and thataEURtms where the opportunity lies.

Indiscriminate Selling Takes Hold

LetaEURtms take a look at QQQ versus BST and another ETF you might have heard ofaEUR"the AdvisorShares New Tech and Media ETF (FNG), a fund investors use to get direct exposure to FAANG and closely related companies without buying them individually.

First, letaEURtms see whoaEURtms doing the best for 2018 on a total return basis. ItaEURtms not even close.

BST Leads on Total Returns aEUR

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Markets Videos

BNK Invest

BNK Invest Inc. provides investment services and information. BNK Invest owns and operates a market news family of websites including DividendChannel, ETFChannel, StockOptionsChannel, and others, which make up an investor community featuring stock message boards, ratings, research, and strategies. BNK Invest caters to investing firms and individual investors internationally.

Learn More