The nascence of the US Stock market can be traced back to May 1792, when twenty-four stockbrokers and merchants of New York signed the Buttonwood Agreement and established the New York Stock Exchange (NYSE).
If the history of 200 years of stock-exchange experience has taught anything, it is that any successful investing is built on evergreen wealth-building principles. Some of those principles call for patience, and discipline to disregard short-term forecasts and bet on long-term prospects.
And in the present financial paradigm, any colloquy of investment-worthy stocks is abridged without mentioning FAANG stocks – since they are one of the long-term and most promising stocks of the 21st century.
The top five S&P 500 Global Industry Classification Standard (GICS) tech stocks in 2022 were Microsoft, Nvidia, Oracle, Broadcom, and Apple.
What are FAANG Stocks?
Tech giants are renowned as the most lucrative investments for long-term gains with a stellar track record of growth and stability. The acronym FANG, coined by The Street’s Bob Lang and reiterated by CNBC’s Jim Cramer in 2013, spells out the four most prominent technology companies of the U.S. including Facebook, Amazon, Netflix, and Google, often praised as the “dominating pioneers in their markets.” Cramer grouped these companies under outsized market appreciation as they all belonged to the threads of high-growth stocks with digitization.
In recent years, there were perhaps only a few companies that could match the distinct business models of FANG. In 2017, the inclusion of Apple in the team made FAANG an elite collective of technology stocks, rather than the original internet-based company stocks.
While many investors expressed their concerns about FAANG stocks being superficial and volatile, analysts countered that the growth of these companies had been justified over the years, by their well-grounded financial and operational performance.
How Did FAANG Become The Most Elite Family Of Tech Companies?
FAANG stocks and Microsoft shares grew more swiftly than the overall benchmark index S&P 500 during the late 2010s, reigning influence over the stock market. When 2014 drew to a close, FAANG stocks accounted for about 7.4 percent of the market cap of the S&P 500, which nearly doubled to 14.4 percent by the end of 2019. At the same time, FAANG stocks’ collective market cap increased by over 178.5 percent, in contrast to S&P 500’s 46.5 percent.
With each stock rising to market capitalization greater than $1 trillion in 2020, Apple, Microsoft, Amazon, and Google represented the largest S&P 500 components with Meta Platforms trailing behind, as per Forbes.
According to a report by CFI, the combined market value of FAANG is nearly $5 trillion, which attributes to more than 10 percent of the $31 trillion of the U.S. stock market’s total market capitalization.
This corresponds to the power of FAANG stocks, making them affect the whole market with even the smallest price change, impacting even investors who do not own any of the elite family’s stocks.
As the best-performing tech companies of the last two decades, with a unanimous reputation of being high-growth investment stocks on the NASDAQ exchange platform, the core FAANG stocks make up for about 29 percent of the platform’s index value.
The momentum of FAANG stocks was perceived to be strong, which beckoned the high-profile purchase interests of influential investors such as Soros Fund Management, Renaissance Technologies, and Berkshire Hathaway. Due to the intrinsic worth that software engineers bring to these tech giants, FAANG is none the miser on the payrolls, classifying them as the most sought-after companies in the world.
A summary of the FAANG companies:
Established In: 2004 by Mark Zuckerberg.
Market Cap: $439.56 billion.
Operating Profits: $28.944 billion.
Facebook Inc. (previously FB, now META) was founded by Mark Zuckerberg in 2004 as a social networking service company. Currently listing over 2.5 billion active users, Facebook could be termed the first application to gain widespread recognition and was once the most downloaded application in the 2010s. Available in 111 different languages, the social media platform transcended the world to Web 2.0 and was renamed Meta Platforms in October 2021, which owns proliferated subsidiaries like Instagram, Messenger, WhatsApp, and Oculus VR.
Facebook’s primary revenue stream was online advertisements and the social media giant Meta Platform’s market capitalization is over $439.56 billion, as of February 2023.
Amazon
Established In: 1994 by Jeff Bezos.
Market Cap: $960.89 billion.
Operating Profits: $17.3 billion.
A diversified tech company with roots in e-commerce, cloud computing, and consumer electronics, Amazon (AMZN) was established in 1994 by Jeff Bezos as an online bookstore. Today, it is one of the most proliferated and largest e-commerce retailers which currently owns subsidiaries like Whole Foods Market and Twitch. Artificial Intelligence assistants such as Amazon Alexa and Amazon Echo, have increasingly become popular in recent years. Amazon operates in several countries around the world. Branching out into delivery systems and streaming services, Amazon listed over 100 million global subscribers by 2018 and its current market capitalization exceeds $960.89 billion.
The Amazon Web Services (AWS) Cloud computing platform continues to drive the company’s profitability with a revenue bolster of 27 percent and operating profits of $17.3 billion year-to-date, which is 33 percent higher year over year. Amazon’s dominance in the e-commerce industry and now AWS paves way for this FAANG stock to be one of the strongest buys for long-term investors, despite the volatile economic conditions of the stock market.
Apple
Established In: 1976 by Steve Jobs.
Market Cap: $2.34 trillion.
Operating Profits: $113.965 billion.
The multinational technology company Apple is the oldest FAANG company founded in 1976 by Steve Jobs and others, based in California. Presently, the largest IT company in the world, Apple was also the first U.S. company to have accomplished a market cap of over $1 trillion. When Apple went public in December 1980, it raised over $100 million through IPO.
The film Pirates Of Silicon Valley is based on the heated struggles of Apple’s Jobs VS Microsoft’s Gates, between 1971 – 1999.
For a brief period, Apple’s stock value surpassed $3 trillion in January 2022 and was acknowledged as the biggest listed company in the world. With nearly revenues of $275 billion, the current market cap of Apple is $2.34 trillion.
Netflix
Established In: 1997 by Reed Hastings.
Market Cap: $143.86 billion.
Operating Profits: $5.633 billion.
Founded in 1997 by Reed Hastings, Netflix (NFLX) was a media provider that offered subscription-based online streaming of various films and television shows. Lately, it is the world’s largest streaming service dominating the entertainment industry with over 209 million paid memberships.
Netflix was all the rage after the pandemic forced people to stay and work from their homes. With a market cap of $235 billion in December 2020, Netflix is operating in over 190 countries and has entered the realm of content production, now funding its exclusive TV shows and movies. As the new normal simmer to an end, the usage of Netflix has dwindled and the company has faced terrible downfalls in user subscriptions. The market cap of Netflix as of February 2023 is $143.86 billion.
Established In: 1998 by Larry Page & Sergey Brin.
Market Cap: $1.15 trillion.
Operating Profits: $83.6 billion.
If there’s another highly-recommended FAANG stock, it’s that of Google.
Known as the world’s dominant search engine, Google was founded by Larry Page and Sergey Brin in 1998 in California. Offering 20 million shares at $85 per share, the company went public in August 2004. Google provides internet-based products and services and triggered its success with productivity services such as Google Docs, Google Sheets, YouTube, and Gmail.
Google is also responsible for developing the famous mobile operating system Android and other consumer electronics such as Chromebook laptops, Pixel phones, and Google Home devices.
Google has been the market leader in online advertising for over a decade and contributed $104 billion to its parent company, Alphabet’s revenue in 2020. Despite concerns about the evolving economy, the behemoth’s monopoly over its growth strategies in search engines and huge potential for Google Cloud makes it a commanding stock to buy for long-term investors.
The best FAANG company recommended to work for is Google, for the best employee satisfaction and work-life balance it offers.
As one of the leading tech giants investing in AI technologies, Google’s CEO Sundar Pichai launched language model ChatGPT’s rival, Bard – the solid tech battle of the decade. The market cap of Google is $1.15 trillion as of February 2023.