Nowadays it is hard to go a week without hearing some sort of news or conversation about FAANG (Facebook, Apple, Amazon, Netflix, and Google). This is not without a reason – these companies/stocks are extremely popular and hold significant influence in our world's biggest stock market sector, technology.
What are FAANG Stocks?
FAANG is an acronym that refers to some of the most valuable stocks by market capitalization in the world. The acronym includes the following tickers: Facebook (FB), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Google (GOOG).
The term was coined originally by famous stock analyst Jim Cramer, the television host of CNBC’s Mad Money in 2013.
Due to their significance in terms of market capitalization, these companies make up a large percentage of popular stock market indexes like the S&P 500. As of August 25th, these companies make up 14.97% of this index.
Why are they so popular?
Besides a catchy acronym, FAANG stocks are popular because the underlying businesses that they represent are some of the most influential on the planet. In fact, you are probably using multiple products/services from these companies to read this article right now. Their popularity and impact have sparked interest in investors from all over the planet which has greatly increased their value over time.
Facebook ownership includes WhatsApp and Instagram. Altogether this social media behemoth has roughly 2.9 billion active users who they monetize via ads.
Amazon
The e-commerce giant is in the top 3 companies in the world with the most revenue at an astounding 386 billion in 2020. Not only has the company done well in e-commerce but is quickly expanding its tech segment through AWS and other services offered.
Apple
Apple is the world’s most profitable company and it’s not without a reason. Its products have a cult-like following and its ecosystem that includes hardware, software, and services is growing strongly with very good margins.
Netflix
The most dominant streaming company in the world has an impressive 207 million active paid subscribers for which it serves content. The company has increased its status worldwide as a content producer with over 1,500 original titles of which many have won prestigious cinematic awards.
This company's influence over internet search cannot be understated with a 92.47% market share of the global search engine market. On top of this, the company owns the popular social media network, Youtube, which an average American spends 24 minutes per day on the platform.
How can you invest in them?
Investing in FAANG stocks can be done primarily in 2 ways. The first is by investing in ETFs or mutual funds that hold these stocks as part of their portfolio. The second way is by buying shares of each or all of these stocks individually. Oftentimes share prices for these companies are in the thousands per share. For this reason, it is a good idea to buy them using an ETF or buying fractional shares, where you can buy a fraction of a share for a much lower price.
Remember in order to buy stocks or ETFs you need a stockbroker who makes the transaction possible and allows you to hold these shares.
Are they a good investment?
This answer is tricky but there are two ways to look at it. First, historically the answer is yes, as you can see in the table below all of these stocks have performed very well. However, oftentimes what performed well in the past can perform poorly in the future.
| Company | 6M return | YTD return | 1y return | 5y return |
| 45.02% | 37.34% | 31.53% | 195.57% | |
| Amazon | 7.99% | 3.60% | -1.35% | 329.30% |
| Apple | 23.24% | 15.22% | 19.45% | 457.61% |
| Netflix | 0.43% | 5.01% | 11.92% | 462.67% |
| 40.86% | 64.51% | 76.83% | 257.99% | |
| S&P 500 | 17.32% | 21.40% | 30.46% | 107.12% |
It’s clear though that these companies still have room to grow and have many opportunities to continue to do well in the future. Therefore what’s crucial to consider is the price paid for the stock and what that means in terms of the stock valuation. If the valuation is too high and the growth and opportunities are already priced in, it can be difficult to earn good returns on overpriced stocks even if they are this popular. If you want to learn more about how to find undervalued stocks and how to do your stock research follow this guide we created.
Now you know everything important about the famous FAANG stocks. We hope this information helps you make good investment decisions and we wish you all the best in your investment journey.
If you want to learn more about how you can get stock financials, key metrics, and growth metrics right on Excel or Google Sheets in seconds for FAANG stocks and thousands more worldwide, check out www.wisesheets.io
To your investing success,
The Wisesheets Team
