FAANG Stocks

FAANG stands for five top-performing U.S. tech companies: Meta (formerly Facebook), Amazon, Apple, Netflix, and Alphabet (formerly Google).
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FAANG stocks
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3 min
25-December-2024

FAANG is an acronym used in finance to refer to five of the most influential American technology companies: Meta (formerly Facebook), Amazon, Apple, Netflix, and Alphabet (formerly Google). The term was coined by Jim Cramer, a well-known television personality, in 2013 to highlight these companies' dominance in their respective markets. Initially, the acronym was "FANG," but Apple was later added in 2017.

Key takeaways

  • FAANG is an acronym for five of the most influential American technology companies: Meta (formerly Facebook), Amazon, Apple, Netflix, and Alphabet (formerly Google).
  • These tech giants are well-known for their innovation and strong financial performance.
  • While their dominance has led to significant growth and market value, some investors debate whether their valuations are justified or if a bubble is forming.
  • The term "FAANG" was popularized by Jim Cramer and has become synonymous with the most powerful tech stocks.

List of FAANG stocks

Now that you know what FAANG is, let us delve a little deeper into each of the companies on the list to try and understand them better.

1. Facebook

Facebook, one of the largest social media platforms in the world, was founded in 2004 by Mark Zuckerberg. The company went public in 2012 with its initial public offering, where it raised nearly $16 billion.

In addition to Facebook, the company also owns two other major platforms — Instagram and WhatsApp. In 2021, Facebook was renamed Meta Platforms to better reflect its growing aspirations to become a multi-platform service provider and leader in artificial intelligence (AI), virtual reality (VR) and augmented reality (AR).

2. Amazon

Amazon was officially established in 1994 by Jeff Bezos. The company is currently the largest e-commerce platform in the world. In addition to e-commerce, Amazon’s business also includes cloud computing, artificial intelligence (AI), online advertising and digital streaming. The company also has several key subsidiaries like Ring, Twitch, IMDb and Whole Foods Market, which contribute to its revenue.

3. Apple

One of the oldest technology companies in the world, Apple was founded in 1976 by Steve Jobs and Steve Wozniak. In its early years, the company competed directly with Microsoft and focused primarily on manufacturing personal computing systems. However, the breakthrough for the company came in 2007 with the release of the iPhone.

Currently, the company’s product portfolio includes a mix of mobile and personal computing devices. Apple has also recently ventured into the augmented reality (AR) sector and is even making a space for itself in the digital streaming space.

4. Netflix

Netflix was first established in 1997 as a mail-order DVD-renting business. However, the company quickly pivoted to the digital entertainment space with the launch of the Netflix streaming service.

Currently, Netflix is one of the most popular over-the-top (OTT) platforms in the world. In addition to hosting third-party content, the company also produces movies, TV shows and documentaries under the Netflix Originals banner.

5. Google

Google was founded in 1998 as a search engine service and quickly became the most preferred search engine in the world. Today, the company’s other businesses include computer software production, cloud computing, advertising services, quantum computing, consumer electronics and even artificial intelligence (AI).

In 2015, the company went through a major reorganisation where Google became a wholly-owned subsidiary of a new parent company — Alphabet. The reorganisation was fueled primarily by Google’s expansion beyond its original search engine service.

What makes FAANG stocks so popular?

The FAANG stocks - Meta, Amazon, Apple, Netflix, and Alphabet - are not only household names but also some of the world's largest companies. Renowned for their innovation and strong financial performance, these tech giants have consistently delivered impressive returns to investors. Their dominant positions in their respective industries and track record of growth make them attractive investment options.

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Advantages of investing in FAANG stocks

Simply knowing the full form of FAANG is not enough. As an investor, you also need to be aware of the various advantages of investing in these companies. Here is a quick overview of some of the key benefits of these stocks.

Strong fundamentals

FAANG companies have mature businesses with strong fundamentals that enable them to generate revenue and profits consistently. Investing in them can be a good way to create wealth in the long run.

Consistent dividend payouts

FAANG stocks have a good track record of distributing their profits in the form of dividends. So, if you choose to add these stocks to your portfolio, you can benefit from the steady stream of passive income they offer.

Diversification

The U.S. stock market responds to micro and macroeconomic factors differently when compared to the Indian market. So, by adding a few FAANG stocks to your portfolio, you could effectively lower your investment risk through diversification.

Resilience and stability

Almost all FAANG companies have demonstrated strong resilience, even in the face of economic downturns and market volatility. As a result, by setting aside some of your capital to invest in these stocks, you may bring added stability to your portfolio.

How does FAANG differ from MAMAA?

MAMAA is an acronym for five of the largest and most popular tech-centric U.S. stocks of 2022. MAMAA is an updated version of FAANG that includes Microsoft instead of Netflix and reflects re-brandings of FAANG members Facebook and Google.

The transition from FAANG to MAMAA reflects changes within the technology landscape, including re-brandings and shifts in the dominance of certain companies. Here's a breakdown of the transition:

1. FAANG:

  • Originally, FAANG represented five of the most prominent and influential tech-centric U.S. stocks: Facebook, Amazon, Apple, Netflix, and Google (Alphabet).
  • This acronym gained popularity due to the significant market capitalization, innovation, and influence of these companies in the technology and entertainment sectors.

2. Transition to MAMAA:

  • The transition to MAMAA involved replacing Netflix with Microsoft and reflecting re-brandings of two FAANG members, Facebook and Google.
  • Microsoft, a longtime tech giant, was included in the updated acronym, replacing Netflix. This change likely reflects Microsoft's growing influence and market position in the tech industry, particularly in cloud computing and enterprise services.
  • Facebook re-branded to Meta Platforms in 2021 to better reflect its expanded focus beyond social media into areas like virtual reality and augmented reality. Thus, the "F" in FAANG was updated to "M" for Meta Platforms.
  • Similarly, Google re-organized under the parent company Alphabet in 2015. As a result, the "G" in FAANG was updated to "A" for Alphabet to reflect this re-branding.

3. MAMAA stocks:

The MAMAA stocks include:

  • M: Meta Platforms (formerly Facebook)
  • A: Amazon
  • M: Apple
  • A: Alphabet (formerly Google)
  • A: Microsoft

The transition from FAANG to MAMAA highlights the dynamic nature of the technology sector, with companies evolving their business strategies, expanding into new areas, and sometimes undergoing significant re-branding efforts.

Are FAANG stocks hard to acquire?

While FAANG stocks are readily available for purchase through various methods, including direct investment or through ETFs, some investors believe they may be overvalued. This sentiment can lead to a reluctance to buy these stocks at current prices, with the hope of acquiring them at a more favorable valuation in the future.

Conclusion

This concludes the fundamentals of what FAANG stocks are. If you are looking to gain exposure to the U.S. stock market, you may consider investing in FAANG stocks. However, if you feel that the high share prices of these tech companies are an entry barrier, you could consider investing in a fund of funds (FoF) that offers exposure to FAANG companies.

Fund of funds are Indian mutual funds that invest in funds of foreign markets. These funds usually have low net asset values (NAV), making them more accessible to a wider range of investors.

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Frequently asked questions

What is FAANG and MAANG?
  • FAANG is an acronym for five of the most influential American technology companies: Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet). These companies are known for their innovation, rapid growth, and dominance in their respective industries.
  • MAANG is a similar acronym that includes Microsoft along with the original FAANG stocks. It reflects the growing importance of Microsoft in the tech industry.
What are the FAANG 7 stocks?

While the traditional FAANG acronym includes five stocks, some analysts have expanded it to seven, including Microsoft and Tesla. So, the FAANG 7 stocks are:

  • Meta (formerly Facebook)
  • Amazon
  • Apple
  • Netflix
  • Alphabet (Google)
  • Microsoft
  • Tesla
Which FAANG company pays the most?

Among the FAANG companies, Apple is known for its generous compensation packages, including stock options and bonuses. However, it's important to note that compensation can vary based on individual roles, performance, and market conditions.

Why is working at FAANG bad?

While working at a FAANG company is often seen as a dream job, it's not without its challenges. Some common concerns include:

  • High-pressure work environment: Long hours, demanding deadlines, and intense competition can be stressful.
  • Work-life balance issues: The demanding nature of the work can lead to work-life imbalance.
  • Lack of job security: The tech industry is known for its rapid changes and layoffs, even at leading companies.
Is Microsoft a FAANG Stock?

Yes, Microsoft is considered a FAANG stock. It has been included in the expanded FAANG acronym, reflecting its significant influence in the tech industry.

What is the full form of FAANG?

There isn't a specific full form for FAANG. It's simply an acronym that combines the first letters of the five companies: Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet).

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