Despite the economic hardship brought about by the coronavirus pandemic in 2020, FAANG stocks outperformed in comparison to the broader S&P 500 Index which grew by 16% in the past year.
While the year 2021 began on a positive note marked by impressive gains on the very first trading day of the year, analysts are beginning to profile the biggest stocks on Wall Street, including the notable group of stocks collectively known as FAANG stocks.
FAANG Stocks are five of the most popular and highly traded tech companies in the United States stock market namely Facebook Inc (NASDAQ: FB), Amazon.com Inc (NASDAQ: AMZN), Apple Inc (NASDAQ: AAPL), Netflix Inc (NASDAQ: NFLX), and Google, a major offshoot of Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG). These firms have several things in common including their tech product focus and the availability of large cash flow to promote new projects, Research and Development as well as expansionary agenda.
Despite the economic hardship brought about by the coronavirus pandemic in 2020, each of these FAANG stocks outperformed in comparison to the broader S&P 500 Index (INDEXSP: .INX) which grew by 16% in the past year. The growth rate of the FAANG stocks as noted by the Motley Fool ranges between the lowest which is Alphabet Inc at 31% and Apple with a growth rate of 81% in 2020. The continuous rollout of in-demand products and services that helped people and businesses get by during the pandemic has been cited as the reason for the growth seen in these group of stocks
But not much is expected of these FAANG stocks this year as many analysts believe that there may be a shift tech focus away from the traditional offerings from the FAANG stocks. According to an earlier report by Coinspeaker, Kenny Polcari, the managing partner at Kace Capital Advisors, also believes that FAANGs will perform smoothly. However, he also notes that the tech industry looks far beyond these blue chips.
Polcari explained:
“Tech is so much bigger than the FAANG stocks. I fully expect that if the market reprices in early 2021, I would expect money to move out the FAANG names because they’ve so over-performed and move into other parts of the tech industry.”
Quick Take on FAANG Stocks to Buy and That to Offload
A Motley Fool analyst has further streamlined the prospect of the FAANG stocks and pointed out Amazon stock as a recommended buy and Netflix as one with potential offload traits.
The backing of Amazon as a buy stock takes its backing from the company’s strong retail e-commerce presence as well as its high-performing Amazon Web Services (AWS) business which continues to contribute significantly to the company’s overall revenue base. Netflix on the other hand got a sell rating because of the growing competition the company is bound to face this year. This competition includes Disney+ streaming services from Walt Disney Co (NYSE: DIS) which has welcomed about 86 million subscribers thus far.
In general, FAANG stocks have strong business fundamentals, and their ability to continually recreate new products with the latest technology and at affordable prices has and may continue to endear them to investors.
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