What Are FANG Stocks?

Updated on Oct 31, 2019 at 7:46 pm UTC by Adedamola Bada · 6 min read
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Photo: Unsplash
Photo: Unsplash

FANG stocks have been a big deal in the stock market because of the high revenues associated with them. Here’s what you should know about them.

FANG is an acronym used to refer to the best performing tech companies we have in the world today. The companies that make up FANG are Facebook, Amazon, Netflix, and Google (Alphabet). As top market shakers, it is not surprising to learn that the collective market cap of the FANG group is around $2.3 trillion.

From the FANG acronym, more have been coined to include Amazon and Microsoft. When Amazon was included in the original four, it became FAANG. Another acronym, FAAMNG was born when Microsoft (MSFT) was added as well. So, with the addition of these two tech companies, the market cap of all of them combined is within the environment of $4 trillion.

The FANG group are known for:

  • Facebook (FB): Social Media
  • Amazon (AMZN): E-commerce, voice-activated technology, cloud computing, and more.
  • Netflix (NFLX): Video Streaming
  • Alphabet (GOOG): Search, Smartphones, Advertising, Autonomous Vehicles, and more.

Basic Understanding of FANG Stocks

FANG represents the four tech companies in the world that are known for their top-notch performance as well as profitability to their investors. The four companies, Facebook, Amazon, Netflix, and Alphabet, trade their stocks on NASDAQ, a measuring tool that weighs the performance of stocks that are seen as economy influencers.

The US market has devised a system that can be used to rate the US economy, and that is the S&P 500 index. This index is based on the market value of the top 500 stocks listed on NASDAQ and the NYSE, of which FANG stocks are part.

On August 10, 2017, FANGs had such a stunning performance that dwarfed even the NASDAQ 100 and S&P 500. The NASDAQ 100 saw a 19% increase, while the S&P 500 also went up by 8.9% year-to-date (YTD). At the same time, FANGs had a profit worth double that of the S&P 500. Their year-to-date were:

  • Facebook (FB) – 45%
  • Amazon (AMZN) – 27%
  • Netflix (NFLX) – 36%
  • Alphabet (GOOG) – 16%

These returns completely beat that of the two indices.

The S&P 500 index ranks FB, AMZN, NFLX, and GOOG as 5th, 3rd, 31st, and 8th (and 9th), respectively. Google has two slots because the company doesn’t have one class of shares like the others, but two (GOOG and GOOGL). There is no much difference between them, but the remarkable thing about the two asset classes is that GOOG has zero voting rights while GOOGL does.

The high ranking of FANG stocks has placed them in a position of influence that no other company enjoys. Their shares have the power to either impact the value of the index positively or negatively. This means that when these stocks are on either a downward or an upward trend, the rest of the market tends to follow suit, provided that the market is characterized by the S&P 500 index.

FANG Stocks: Net Income, Stock Prices And Market Caps (2014-2019)

We are going to take a closer look at the net income, stock prices, and market caps of the FANG group from as far back as 2014.

FacebookNet Income, $Share Prices, $Market Cap, $
20142,925B78.0200178.54B
20153,669B104.6600234.56B
201610,188B115.0500307.33B
2017 15.92B176.4600428.95B
201822.111B131.0900349.25B
201917.063B180.03507.112B
AmazonNet Income, $Stock Prices, $Market Cap, $
2014-241M310.3500141.67B
2015596M675.8900255.40B
20162,371B749.8700388.54B
20173,033B1169.4700480.43B
201810,073B1501.9700895.66B
201912.096B1721.9900985.37B
NetflixNet Income, $Share Prices, $Market Cap, $
2014266.8M48.801427.18B
2015122.64M114.380044.13B
2016186.68M123.800042.29B
2017558.93M191.960078.48B
20181,211.24B267.66002.576T
20191,151B267.53118.53B
AlphabetNet Income, $Stock Prices, $Market Cap, $
201414,136B526.4000194.04B
201515,826B758.8800225.20B
201619,478B771.8200274.47B
201712,662B1046.4000344.04B
201830,736B1035.6100383.34B
201934,744B1202.31392.53B

FANG Stocks: YTD Performance

Year-to-date (YTD) begins its count from the very first day of the present calendar year to the current date in question. The information provided by YTD is beneficial to businesses because it helps them to analyze trends over a period of time or to measure their performance against their competitors within the same industry.

 FacebookAmazonNetflixAlphabet
Start Date12/31/201812/31/201812/31/201812/31/2018
End Date10/09/201910/09/201910/09/201910/09/2019
Start Price, $131.091,501.97267.661,035.61
End Price, $179.851,721.99267.531,202.31
Dividends Collected, $0.000.000.000.00
YTD Return, %37.2014.65-0.0516.10
Annual Gain, %48.3119.03-0.0620.91
Starting Investment, $10,000.0010,000.0010,000.0010,000.00
Ending Investment, $13,720.0011,465.009,995.0011,610.00
Years0.770.770.770.77

Trump and FANG Stocks

History has shown that tariffs and the United States have not fared well together and with Trump towing the same path as President Hoover, warnings from economists have echoed in order to stop the president from making the same mistake Hoover did. However, all warning calls have fallen on deaf ears and so far, the president has imposed tariffs on $250 billion worth of Chinese goods which has been answered with a counter $60 billion tariff from China on American products.

The truth remains that tariffs are not friends with the stock market, and if Trump doesn’t do anything soon to bring the trade war with China to a close, the stock market may suffer greatly, maybe not immediately but surely sometime in the future.

The impeachment of President Trump is yet another issue that has kept market analysts on their toes, and it seems as if the stock market cannot get a break. The surprising thing is that the stock market appears to be unperturbed about the impeachment process going on against the Trump administration, but only time will tell whether the market will continue to be strong or cave in.

However, there seems to be a glimmer of hope as Trump has hinted that a cease-fire with China regarding the trade war is in the works, a piece of joyous news that triggered a surge in the prices of assets in the stock market.

FANGs reacted in the following way: Facebook went up by 1%, Amazon by 1.5%, Netflix by 4%, and Google by 2.3%.

Anything Like a FANG Bubble?

Looking at the records, FANGs have been consistent in the delivery of good returns, but this has not successfully removed doubts from the minds of some analysts. This group of people still believe FANG is a ticking time bomb, and it’s only a matter of time before it goes the way of tech stocks before the dotcom crash.

In spite of this comparison, not all analysts believe that FANG is a disaster waiting to happen. In fact, a majority of them are of the opinion that the growth of FANG stocks is sustainable, and this is based on the argument that there are yet to be discovered technological breakthroughs, especially in the fields of machine learning and artificial intelligence (AI), and as long as there are untapped potentials in these fields, FANGs will never cease to be profitable.

While diversification of portfolio is encouraged among investors, it is also essential to do so after careful research. Before investing in FANGs, which are known for their tremendous turnovers, investors should familiarize themselves with the basic principles that drive FANG stocks.

Summary

Back in 2013, a lot of people did not believe in FANG stocks, and today, they have themselves to blame. Those who keyed into them definitely have a lot to be thankful for, especially if they keyed in heavily. These companies have now become industry pillars, and breaking new grounds has become a norm for them. At the helm of affairs in the tech industry, we can be sure that the future is going to be more interesting than it already is today.

The only downside is that those who will be investing now into these companies will be doing so late because they have gone far in their growth cycle, and only those who invested in them years ago have the upper hand.

Yet, it is not all doom and gloom for recent investors as the FANG group, Facebook, Amazon, Netflix, and Alphabet have what it takes to continue to dominate the market. As more technological advancements are made, the upside becomes clearer. So, invest if you want to because it can only get better.

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