The acronyms cannot possibly illuminate everything but they help
investors make sense of the uncertain and often random nature of
The acronyms have no meaning in themselves – until that
meaning has been artifcially created. The acronyms can even become
self-sustaining in a world of thematic funds, leveraged exchange traded
funds and complex derivatives.
As the acronym takes hold in the financial
zeitgeist, assets and mindshare are channelled into this subset of stocks.
This, in turn, increases the correlation and crowding of the stocks in focus.
As a result the acronyms becomes self-perpetuating, building up risk. In
the event of a market reappraisal of these stocks, will investors know why
they were grouped together in the first place?
Today, analysts roundly expect the good news to continue, with expectations that the FAANMG’s
will increase in price by 63 per cent over the next year. The BHATTS are
expected to almost double, with consensus predicting an 88 per cent
upside. With that sort of market expectation, perhaps the acronyms have
already succeeded in persuading investors of their importance.