What Are FAANG Stocks?
In finance, "FAANG" is an abbreviation that alludes to the stocks of five conspicuous American technology companies: Meta (META) (formerly known as Facebook), Amazon (AMZN), Apple (AAPL), Netflix (NFLX); and Alphabet (GOOG) (formerly known as Google).
The term was promoted by Jim Cramer, the TV host of CNBC's Mad Money, in 2013, who commended these companies for being "totally prevailing in their markets." Originally, the term "FANG" was utilized, with Apple — the second "A" in the abbreviation — added in 2017.
Grasping FAANG Stocks
As well as being widely known among consumers, the five FAANG stocks are among the largest companies in the world, with a combined market capitalization of around $7 trillion as of Q1 2022.
Their substantial growth has been floated recently by high-profile purchases made by large and powerful investors like Berkshire Hathaway (BRK), Soros Fund Management, and Renaissance Technologies. These are just a couple of the numerous large investors who have added FAANG stocks to their portfolios due to their perceived strength, growth, or momentum.
Every one of the FAANG stocks trades on the Nasdaq exchange and is remembered for the S&P 500 Index. Since the S&P 500 is a broad representation of the market, the movement of the market reflects the index's movement. As of August 2021, the FAANGs make up around 19% of the S&P 500 — a stunning figure considering the S&P 500 is generally seen as a proxy for the United States economy as a whole.
This large influence over the index means that volatility in the stock price of the FAANG stocks can significantly affect the performance of the S&P 500 overall. In August 2018, for instance, FAANG stocks were responsible for almost 40% of the index's gain from the lows arrived at in February 2018.
Illustration of FAANG Stocks
The extraordinary size and influence of the FAANG stocks have provoked concerns about a potential bubble in FAANG stocks. These concerns began gaining unmistakable quality in 2018, when technology stocks, which had been driving reliable gains in the stock market, started losing their former strength. In November 2018, several FAANG stocks lost over 20% of their valuations and were declared to be in bear territory. By certain evaluations, FAANG stocks lost in excess of a trillion dollars from their pinnacle valuations because of the lofty drop in the markets in November 2018.
In spite of the fact that their valuations have since recuperated, the level of volatility some of the time shown by FAANG stocks — and the larger than usual influence these stocks can have on the market overall — is a source of concern for certain investors.
Then again, the people who trust in the fundamental strength of the FAANG stocks have plentiful evidence for this claim. For instance, Facebook is the world's largest social network with roughly 2.8 billion users. In its 2021 annual report, Meta posted revenues of $118 billion and net income of $39.4 billion.
Amazon, in the mean time, has turned into an apparently unconquerable force in business-to-consumer (B2C) web based business. With north of 120 million products available to be purchased, it has north of 300 million active customers in the United States, of whom the greater part pay for month to month Amazon Prime enrollments. With 2021 TTM revenues of $470 billion and a net income of $33.4 billion, it isn't difficult to comprehend the reason why investors accept Amazon's tremendous market capitalization is justified.
Overall, it is through strong financial performance, for example, this that the FAANG stocks have flourished recently. Throughout the course of recent years, for example, Meta and Amazon have seen stock-price increments of 185% and 500%, separately. As far as concerns them, Apple and Alphabet saw price increments of around 175% throughout that equivalent time span, though Netflix saw its value rise by almost 450%.
- FAANG is an abbreviation alluding to the stocks of the five most famous and best-performing American technology companies.
- The term was begat by The Street's Bob Lang and promoted by Jim Cramer on his CNBC TV show Mad Money.
- These are: Meta (formerly known as Facebook); Amazon; Apple; Netflix; and Alphabet (formerly known as Google).
- Some have raised concerns that the FAANG stocks might be amidst a bubble, while others contend that their growth is justified by the stellar financial and operational performance they have displayed in recent years.
- As well as being widely known among consumers, the five FAANG stocks are among the largest companies in the world.
Who Coined the Term FANG Stocks?
While Jim Cramer unquestionably promoted the term, he personally credits Bob Lang, a Real Money and The Street partner of Cramer's, with distinguishing these four stocks and developing the abbreviation.
Is Microsoft a FAANG Stock?
No. Microsoft isn't a FAANG stock, which is the reason there is no "M" in the abbreviation. FAANG stocks were intended to portray hot, new high-growth tech companies of the 2010s. By then Microsoft was at that point a mature, more established company.
What Makes FAANG Stocks So Popular?
The five stocks that make up the "FAANG" abbreviation — Meta (META), Amazon (AMZN), Apple (AAPL), Netflix (NFLX), and Alphabet (GOOG) — are notable brands among consumers. Yet, they are additionally well known for their amazing growth in recent years, with market capitalizations going from $166 billion (on account of Netflix) to $2.7 trillion (on account of Apple), as of Q1 2022. According to an investment point of view, these five stocks are generally applauded for their stellar historical histories and clear leadership positions inside their industries.
Are FAANG Stocks Overvalued?
Investors differ about whether the FAANG stocks are overvalued. Their advocates will contend that their valuations are justified in light of their fundamental strength as businesses. However, that's what pundits contend, even with noteworthy business performance, the FAANG stocks' prices have become so costly that it very well might be challenging to acknowledge attractive long-term profits from investing in them. Eventually, this "banter" between investors is best caught by the buying and selling designs in the FAANG stocks themselves.
Are FAANG Stocks Hard to Acquire?
No. The FAANG stocks are not difficult to get, as in they are publicly traded companies with substantial daily trading volumes. They are additionally regularly remembered for well known exchange-traded funds (ETFs). Nonetheless, investors who accept that the FAANG stocks might be overvalued would contend that they are hard to obtain at a conservative price. These investors might be enticed to postpone purchasing FAANG stocks, waiting for their valuations to decline.