After a three-month rally that's added more than $800 billion to the value of FAANG stocks, individual investors have decided it's time to cash out of the high-flying names.
Retail clients at brokerage TD Ameritrade increased their overall exposure to equity markets for a second consecutive month in March, yet they sold shares of Amazon, Facebook, Netflix and Apple. All four members of the so-called FAANG cohort — which also includes Google parent Alphabet — have gained at least 35% since stocks bottomed on Christmas Eve, which is 1½ times the S&P 500's return.
"Taking profits isn't the worst idea in the world," said Joe "JJ" Kinahan, chief market strategist at TD Ameritrade, noting that clients had been buyers of Amazon for eight straight months while also showing immense interest in Netflix in recent periods. "What it makes me wonder is, they were the momentum stocks, so where do we get our new momentum?"
It's possible the answer to that question is cannabis companies, according to Mr. Kinahan. While clients of TD Ameritrade shunned the FAANG names last month, many were buyers of Aurora Cannabis Inc. and CVS Health Corp., which recently announced that it will begin selling CBD-infused products at more than 800 of its stores. Millennial clients also scooped up shares of Canopy Growth Corp., according to a statement from TD Ameritrade.
(More: BlackRock invests in pot stock)
Retail investors were also large buyers of Tesla, NIO Inc., and AT&T in March. In addition to the FAANG stocks, retail investors were large sellers of Intel.