FAANG is an acronym formed by Jim Cramer, TV host of CNBC owned Mad Money. Cramer first formed the acronym in 2013 as FANG until it was later modified to FAANG. The acronym is a combination of the stocks of the five prominent US owned and based tech companies. They are;
F= Facebook (FB)
A= Amazon (AMZN)
A= Apple (AAPL)
N= Netflix (NFLX)
G= Google (GOOG) (Alphabet Inc.)
These tech companies are prominent because they dominate their individual industries. Facebook (FB) dominates the social networking and social media industry in addition to its other social networking platforms, WhatsApp and Instagram. Amazon (AMZN) is the leading e-commerce store and also leads in cloud-computing. Apple (APPL) is the leading mobile phone and computer maker in its industry. Netflix (NFLX) tops the market on online video subscription. While Google tops the search engine market.
What’s so important about the FAANG stocks?
In America alone, the top five products and services Americans make daily use of involves the FAANG. For example, the average American owns an iPhone and is very likely to log on Facebook to see what family and friends are up to. They would later move on to Google to search for trending topics or look up a product or service in a particular area. Amazon is the go-to for swift online shopping having their goods delivered to their doorstep in no time. And at the end of the day, Netflix is the go-to site for online video entertainment, catching up on all their favorite movies without having to go to the cinema.
Out of the 7 billion people on the planet, more than 2.3 billion are active users on Facebook. There are approximately 129 million households in the United States and Amazon has at least 100 million Amazon Prime memberships in the US alone. While half of the American population owns an iPhone. It was reported that about one-fifth of the total internet bandwidth in the US is consumed on Netflix yearly. Also, Google has over 1 billion active users who make use of one of their eight products—Google Search, Google Maps, Gmail, Chrome, YouTube, Google Play Store, and Google Drive—daily.
There are other alternatives to the FAANG but on a daily basis, the average American makes use of either of these companies’ products and services compared to any other. They have somewhat, moved pass the best performing tech companies’ stocks to the most patronized tech companies in America.
How have these stocks performed over time?
The FAANG stocks are not only known for the catchy titles but they are also among the largest companies in the world. Together they have a market capitalization of more than $4.1 trillion as of January 2020.
Asides topping their industries and having a large consumer base, the significant growth of these companies can also be attributed to their generous investors. These investors include Berkshire Hathaway, Renaissance Technologies, and Soros Fund Management. Though some investors are more interested in investing in stocks of bankrupt companies that still have potentials. A few investors have picked interest in the FAANG stocks due to their overall performance and consumer base.
The FAANG stocks are traded on the Nasdaq and are listed on the S&P 500 index. The FAANG stocks alone make up nearly 15% of the S&P 500. They also largely influence the index. It was reported in August 2018 that the FAANG stocks jumped the about 40% of the index gains from its previous lows in February that same year.
In spite of the FAANG stocks' performance in the markets, some analysts are concerned that a bubble could be forming in the FAANG. It would only be a matter of time before the bubble bursts.