What Are FAANG Stocks? Find out here

Trading in the stock market has been increasing over the years. They have proved to be beneficial if the right methodologies are followed. Many investors invest in reputed companies as they are expected to provide stable returns. While this is true, it is also recommended to check the fundamentals of the company. Following the trend of investing in reputed companies, FAANG stocks are in the spotlight. These stocks have caught the interest of many investors – both experienced and novice. In this article, we will walk through what FAANG stocks are and dive into the details of each FAANG stock.

What is FAANG Stocks?

The abbreviation of FAANG is Facebook, Amazon, Apple, Netflix, and Google. FAANG stocks meaning is just that it includes these 5 prominent companies. This term was coined in the year 2012 by Jim Cramer. All of these companies have headquarters in the United States. They have grown in popularity in leaps over the past few years leading to them being household names. They play a major role in our day-to-day lives. These 5 FAANG companies together make up for a market cap of over $4 trillion. Having such a high valuation, they contribute significantly to the stock market. Let us gain further insight into each of these FAANG companies in detail.

Insights Into FAANG Stocks

FAANG stocks are listed on the S&P 500 index, NASDAQ 100 index, and others. All of these 5 companies hold different percentage shares in the S&P 500 index. Facebook holds 2.2 %, Google holds 3.9%, and Amazon holds about 3.9%. Netflix holds the least of 0.6% with Apple holding the highest of 5.6%. These 5 companies combined constitute more than 16% of the index altogether. In NASDAQ 100, Apple holds the highest of 11% yet again, with the least percentage of shares held by Netflix at 1.7%. Amazon holds 8.4% with Facebook and Google holding 4% and 7.7% respectively. These shares together make up for nearly 33% of the value of the NASDAQ 100 index. Now, let us have a look at each of these stocks in detail.

  1. Facebook

Facebook was incorporated in 2004 and started out as one of the most popular social media platforms. It currently has a user base of 2.7 billion users. Many prominent companies such as Whatsapp, Oculus VR, and Instagram are owned by this company. Facebook makes most of its revenue through advertisements. It’s revenue had increased manifold from $1.97 billion in 2010 to $90 billion in 2020. This compounded revenue growth rate of 40% was attractive to many investors. One of the main reasons for this rapid growth was the flexibility of Facebook to embrace change and grow according to the user’s needs.

  1. Apple

Apple was founded in 1976 and it changes the view of the entire world on luxury devices. They grew to become the largest smartphone manufacturers in the world. Apple quickly transformed from a company to a brand. This added advantage allowed them to make a mark in the industry. Currently, Apple is valued at over $ 2 trillion. In the early 2000s, the revenue of Apple was at $7.9 billion which soon rose to be $65 by the 2010s. In recent years, the revenue of Apple has been nearly $275 billion.

  1. Amazon

Amazon started as a platform that sold books. Now, Amazon is the largest e-commerce player in the industry. Over the last 10 years, their revenue grew from $34.2 billion to more than $260 billion, marking an annual growth of over 25%. By acquiring more and more sellers, Amazon has expanded its marketplace to an extent that is almost impossible to replicate.

  1. Netflix

Starting out as a rental service that mailed DVDs to customers, Netflix is one of the largest streaming service businesses in the entertainment industry. It pivoted its business model for good from a rental service to providing a platform to stream movies, TV shows, and more online. They plan to introduce an online gaming experience on the platform soon. Netflix grew 10x in the last decade. It now has 190 paid subscribers on its platform.

  1. Google

Providing software solutions like Chrome, Maps, GPay, email services, YouTube, and others, Google widened its reach among customers rapidly. Through these facilities, Google improved its market capitalization to $1.18 trillion in the present. The majority of Google’s revenue is from advertising. Google also entered the space of manufacturing hardware such as speakers, phones, and laptops. With continued innovation and research, Google is bound to expand and cater to different types of users.

FAQs

  1. Are FAANG stock overpriced?

Many investors consider the pricing of FAANG stocks to be fair. Their justification is that the prices of these FAANG stocks are justified due to the strong fundamentals of these stocks. However, critics do not agree with this justification. They argue that although the performance of FAANG stocks are impressive, their share prices are overvalued. Their main concern is that long-term profits may not be provided for these stocks that are comparable to these expensive stock prices.

  1. Why are FAANG stocksso popular?

FAANG stocks are essentially made up of the stocks across Facebook, Amazon, Apple, Netflix, and Google. These are very popular consumer brands. The services offered by these companies are used by people on a daily basis. As a result, they have observed remarkable growth across these years, thereby making these stocks so popular.

  1. Is it tough to get FAANG stocks?

Not at all. FAANG stocks are easy to acquire as they are publicly traded on the stock market. They are also included in ETFs.

In a Nutshell

FAANG stocks have undoubtedly been the most popular stocks in the stock market for a long time now. They have delivered tantalizing returns for the entirety of the past decade. They contribute to the majority of several indices and determine the overall movement of the share market. Due to a track record of providing high returns, many investors lean towards investing in FAANG stocks.