What Are FAANG Stocks? Here’s What You Need to Know About These Top Tech Stocks

The post What Are FAANG Stocks? Here’s What You Need to Know About These Top Tech Stocks appeared first on Millennial Money.

These technology stocks are leaders in their respective markets and consistently put up market-bearing returns. Here’s why you need FAANG stocks in your portfolio ASAP! 

Back in 2013, television host Jim Cramer dubbed Facebook, Amazon, Netflix, and Google the “FANG stocks” on his CNBC show Mad Money. The name stuck with investors and eventually, Apple was added to the list of technology growth stocks. 

Fast-forward to today and these tech stocks continue to dominate in their respective industries and deliver outsized gains for their investors. 

If you’ve ever wondered why these companies are referred to so often by Wall Street as some of the best stocks and why investors sometimes use these companies to measure the broader tech industry’s growth, read on! 

The 5 FAANG Stocks 

  1. Facebook
  2. Amazon.com
  3. Apple 
  4. Netflix
  5. Google (Alphabet)

Facebook (Nasdaq: FB)

Facebook (NASDAQ:FB)
Price: $341.37 (as of close Jun 25, 2021)

While it’s the youngest company on this list, Facebook is still considered a tech stalwart (tech company ages are basically measured in dog years). The company hardly needs an introduction considering the amount of monthly active users its namesake social media app has totals one-third of the world’s population.

Despite losing some of its goodwill over the past few years—and receiving some heat from politicians on both sides of the aisle—Facebook is a tech behemoth that simply cannot be ignored. Between its Facebook app, Instagram, and WhatsApp, there’s simply no getting away from the social media giant. Anyone who’s ever tried to “quit Facebook” knows just how hard it is to escape the company’s grasp.

Facebook has intertwined so many methods of connecting people to others that the company can easily be used as the definition of a network effect itself.

So we all know Facebook is big, but how’s it doing financially and as an investment? Gangbusters is the answer. In 2020, the company’s revenue grew by 22% and net income skyrocketed 58%.

The company also has nearly $18 billion in cash, which makes it insanely easy for it to snatch up smaller companies so that it can enter new markets.

And as an investment, consider that the company’s share price has nearly doubled the S&P 500’s gains over the past five years—spiking 192%.

Like other technology companies, there are always going to be skeptics claiming the demise of a company. The next time you hear that Facebook is finished, kindly slide the company’s quarterly earnings report across the table to your friend—or open your favorite investing app and just show them the company’s long-term gains. Either way, they’ll get the point. 

Amazon.com (Nasdaq: AMZN) 

Price: $3401.46 (as of close Jun 25, 2021)

The e-commerce giant got its start during the early days of the internet by selling books online, but it has since transformed itself into an e-commerce giant that delivers nearly anything we need right to our front doors. It’s literally the “Everything Store.”

Under the leadership of founder and former CEO Jeff Bezos, Amazon has evolved into a $1.75 trillion dollar technology company with its hands in everything from cloud computing services to grocery stores. 

I could spend an entire article writing about all of Amazon’s businesses, but lucky for you, we don’t have time! That said, it’s worth taking a look at some of the company’s largest businesses, including Amazon Web Services (AWS) and its e-commerce platform to understand just how important this company is to the broader market. 

First up is the company’s massive e-commerce platform and its more than 200 million Prime members worldwide. The company generated $236 billion in sales from its North American e-commerce business in 2020—an increase of 38% from the previous year—and operating income jumped by 23%.

Amazon is also seeing explosive growth from its international e-commerce business as well, with sales spiking 39% in 2020.

It ain’t easy for any company to put up that kind of growth, but it’s especially impressive when the company is worth an unfathomable amount of money.

To really understand Amazon, investors need to look at the company’s AWS business. While AWS doesn’t generate as much revenue as e-commerce—its sales were $45 billion in 2020—it brings in far more profit than e-commerce. 

Consider that AWS’s operating income in 2020 was $13.5 billion, while e-commerce operating income was just $8.6 billion. That means the company made more money from AWS even though e-commerce revenue was more than five times Amazon’s cloud computing sales. 

And yes, Amazon’s stock is putting up astronomical gains as well. The company’s stock outpaced the S&P 500 by more than 3.5X over the past five years, gaining an enviable 385%. 

Pick Like A Pro

Where to invest $500 right now

Lots of new investors take chances on long shots instead of buying shares of great companies. I prefer businesses like Amazon, Netflix, and Apple — they’re all on my best stocks for beginners list.

There’s a company that “called” these businesses long before they hit it big. They first recommended Netflix in 2004 at $1.85 per share, Amazon in 2002 at $15.31 per share, and Apple back in the iPod Shuffle era at $4.97 per share. Take a look where they are now.

That company: The Motley Fool.

For people ready to make investing part of their strategy for financial freedom, take a look at The Motley Fool’s flagship investing service, Stock Advisor. They just announced their top 10 “best buys now” across the entire stock market. Whether you’re starting with $100, $500, or more, you should check out the full details.

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Apple (Nasdaq: AAPL) 

Price: $133.11 (as of close Jun 25, 2021)

Considering Apple was founded back in 1976, the company is the grandfather of the FAANG stocks group… a grandfather who competes in triathlons, can beat you in arm wrestling, and skydives on the weekends. The point is that Apple is as young as ever and its massive growth over the past few years proves it. 

Consider that the company’s stock price has gained more than 4.5X the broader market’s returns over the past five years!

How does Apple—a company with a $2.2 trillion valuation—do it? Apple has methodically built out one of the largest technology ecosystems in the world. The company has more than 1 billion iPhone users worldwide, and those devices help the company sell other services and more devices to those users. 

This idea of creating great products and selling them at premium prices has been at the core of Apple since its beginning and it’s why we’re still talking about Apple as a top tech stock right now—forty-five years after it debuted the Apple I personal computer. 

Apple has evolved multiple times since it was founded and each time it seems the company grows stronger and more inventive. Apple still makes the bulk of its revenue from its iPhone, but it is transitioning to more services sales, which grew more than 16% in 2020 and now represents nearly one-quarter of Apple’s total revenue. 

Apple Music, a premium Apple Podcasts subscription, Apple TV+, Apple News+, iCloud, and Apple Care services—not to mention its App Store—are all part of the company’s services bet. But Apple isn’t stopping there. 

The company has also successfully moved farther into additional hardware sales—through its Apple Watch, AirPods, and Beats products—that bring in significant revenue for the company long after customers have already forked over significant sums for its Mac, iPhone, and iPad devices. 

Apple has been chided by skeptics over the years as having lost its creativity and its influence in the tech industry, but Apple has always ignored the haters, continued to release products and services (at its own pace) and proved the naysayers wrong time after time.

Netflix (Nasdaq: NFLX) 

Price: $527.07 (as of close Jun 25, 2021)

Nearly every major media company has its own video streaming service these days, but there was a time when Netflix was the only player. And to many, Netflix is still the rebel king of streaming services. The company helped pioneer an on-demand internet streaming service that wasn’t tied to a cable or satellite subscription—and TV hasn’t been the same since. 

Netflix first launched its streaming platform after successfully having a DVD-by-mail service. I honestly remember saying to myself the first time I logged on: “Now this is the future of television!”

I didn’t have any uncanny insight into television trends, of course, as it appears everyone else had that exact same thought. Because now Netflix has 208 million paid members and a host of competitors striving to be the next Netflix. 

Think about this: When Netflix first started streaming there was no Hulu, Amazon Prime, AppleTV+, Discovery+, HBO Max, Disney+, Peacock, or whatever other streaming service is about to go live. And even with all of that competition, Netflix is still the top streaming company by number of subscribers. 

That doesn’t mean Netflix doesn’t have its work cut out for it, it certainly does. All of its major competitors are spending billions to create their own original content libraries, but the good news for Netflix is that consumers appear more than willing to pay for multiple video streaming services. 

At the end of 2020, the average American consumer subscribed to seven video streaming services per month! Maybe that’s not something we should brag about to other countries, but it’s great news for streaming companies.  

The fact is that Netflix is still benefiting from its first-mover advantage in the video streaming space and the company’s spending on original content helps ensure that no matter what monthly services consumers are signed up for, Netflix nearly always makes the cut. 

Google (Nasdaq: GOOG) (Nasdaq: GOOGL) 

Alphabet (C shares) (NASDAQ:GOOG)
Price: $2450.17 (as of close Jun 25, 2021)

Google is now part of the umbrella company called Alphabet—which includes Google, YouTube, Waymo, etc.—but for the sake of continuity of the FAANG acronym, let’s just call it Google for our purpose. Besides, “FAAAN stocks” just doesn’t have the same ring to it. 

Alphabet’s Google has given us some of the most important software services to date, including the Android operating system used by more than 2.5 billion users! 

The fact is that our lives wouldn’t be the same without Google. Most of us log into its email service daily, use its Maps app to get around town, upload our photos to Google Photos, and use YouTube to watch funny videos of pets knocking over kids instead of working (not me, of course, I’m never distracted from my writing).

Most importantly though, tons of companies use Google Ads to buy and display ads online. Like, seriously, a lot. In 2020, Google’s ad revenue was $147 billion—even during a global pandemic. 

But while Google’s advertising segment will likely be the company’s most lucrative business for years to come, the company is continually evolving. Driverless cars, smart virtual assistants, cloud computing, video streaming, smart home systems, and a host of other projects make Alphabet one of the most innovative companies in the world. 

Alphabet’s stock price has outpaced the S&P 500 index by more than 2.5X over the past five years and the company shows no signs of slowing down. The company’s services are embedded into our daily lives more than ever and the advertising market is continually expanding. 

Consider that the global digital advertising market will grow to an estimated $645 billion by 2025—a 42% increase from 2021! With Google already the leading online advertising platform, there’s no doubt the company will continue to dominate this market for years to come. 

FAANG Exchange-Traded Funds

Many times it’s possible for investors to buy an exchange-traded fund (ETF) that gives investors exposure to a basket of stocks in specific segments, like blockchain technology, space exploration, or airlines. 

But there currently isn’t an ETF that tracks just the FAANG stocks. The closest ETF is likely the NYSE FANG+ Index (NYFANG), which includes the above companies plus Alibaba (BABA), Baidu (BIDU), NVIDIA (NVDA), Tesla (TSLA), and Twitter (TWTR). 

Frequently Asked Questions 

Is there a FAANG stock ETF?

There are no ETFs that track only the five FAANG stocks. But there are several ETFs that focus on the technology sector and include the five FAANG stocks. One such ETF is the NYSE FANG+ Index.

Is Tesla a FAANG stock?

No, Tesla is not a FAANG stock. The list of FAANG stocks includes Facebook, Amazon, Apple, Netflix, and Alphabet (formerly Google).

Are FAANG stocks a good investment?

The share price gains of FAANG stocks have consistently outpaced the gains of the broader stock market. Over a ten-year period, each of the FAANG stocks have easily beaten the S&P 500’s gains, with Netflix nearly tripling the S&P 500’s gains and Amazon up nearly seven times the broader market’s return. 

The post What Are FAANG Stocks? Here’s What You Need to Know About These Top Tech Stocks appeared first on Millennial Money.

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