Streaming video platform Netflixis the only original FANG member not included in the MAMAA group. Investors seek to buy and hold FAANG stocks because of their incredible return rate, especially when put side-by-side with the S&P 500 Index. Take a look at how each stock performed from March 1, 2009 to July 1, 2021. The five FAANG companies combined account for approximately 20% of the S&P 500 and close to half of the Nasdaq-100 Index. Replacing Netflix with Microsoft bumps those percentages up to about 26% and 60%, respectively.
No fund or exchange-traded fund (ETF) exclusively contains FAANG or MAMAA stocks. However, the NYSE FANG+ index tracks the five FAANG stocks and five other tech and tech-enabled leaders, including Microsoft. Apple is one of the few companies that makes both the hardware and the software for its devices — and it is certainly the only one at its scale.
Understanding FAANG Stocks
Windows licensing sales are now dwarfed by its cloud computing operation, Azure, and its Office productivity suite. Founded in 1993, The Motley Fool is a financial services company dedicated to making the world smarter, happier, and richer. The Motley Fool reaches millions of people every month through our premium investing solutions, free guidance and market analysis on Fool.com, top-rated podcasts, and non-profit The Motley Fool Foundation. While consumers may be familiar with these tech names, they may not be aware of the huge returns generated by these six companies for the 11-year period from the start of 2012 to the end of 2022.
When Cramer first coined the term FANG back in 2013, Facebook’s market cap was just $65 billion and the company was less than a year removed from its initial public offering (IPO) in May 2012. In the years that followed, Facebook grew from an unprofitable social media platform to a multi-platform online advertising behemoth. The origin of the acronym has been attributed to Jim Cramer, the financial TV host and co-founder of The Street.com. Known for his slangy abbreviations and catchy phrases, Cramer coined the term in 2013 to represent four tech stocks with outsized market appreciation.
Google has been the market leader in online advertising for well over a decade and is expected to command nearly a 29% share of digital ad spending globally in 2021, according to eMarketer. These corporations — all American, but with a global presence — are not only household names, they’re financial behemoths. The blue-chip stocks of the tech sector, they collectively make up 15% of the Standard & Poor’s 500 (an index of the largest public companies in the US). So they represent not only one of the US’ most significant industries, but a sizable chunk of the US stock market itself. In 2022, Alphabet holds a dominant share of the online advertising market, but the growth segments that attracted investors for so many years have started to slow.
Unfortunately, since then Meta’s revenue growth has stalled, including a 4.4% decline in revenue in the third quarter of 2022. The company has also reported $9.4 billion in year-to-date losses for its metaverse segment. However, the company announced a rebranding of Meta Platformslater that year to mark its shift in focus to building the metaverse, an online digital world in which users interact and live virtual lives. Unfortunately, a combination of rising interest rates, market saturation, increasing competition and a reset in tech stock valuations has changed the narrative for FAANG in 2023. Netflix has been hit particularly hard, and the company has dropped behind its peers in terms of growth and prominence. For investors, the tech sector has become increasingly important as a wave of high-technology companies have recently gone public through initial public offerings (IPOs) or SPACs.
Apple made about $366 billion in total revenue in the financial year that ended on Sept. 30, 2021, with iPhones making up about 33% of the total sales. That revenue mix, however, is changing fast as the biggest FAANG stock by market cap tries to sell more of its services which offer higher margins. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or https://www.fx770.net/ by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range, can also impact how and where products appear on this site.
When people refer to FAANG stocks, they are talking about the top-tiered stocks in technology that have dominated the market. These are five of the most popular and often best-performing technology companies in the stock market. The FAANG stocks are all easy to acquire, in the sense that they are publicly traded companies with substantial daily trading volumes. They are also routinely included in popular exchange-traded funds (ETFs). However, investors who believe that the FAANG stocks may be overvalued would argue that they are difficult to acquire at an economical price. These investors may be tempted to delay purchasing FAANG stocks, waiting for their valuations to decline.
FAANG companies’ dominance in major US indices is likely to remain unchallenged for many years to come. Morningstar has a “buy” rating and $320 fair value for Microsoft shares, and other Wall Street analysts agree that long-term investors should be buying the 2022 dip. The 40 analysts that cover Microsoft have an average price target of $290, suggesting 25.2% upside potential.
Benefits of Investing In FAANG Stocks
Leon isn’t alone in his belief that Netflix has a difficult journey ahead. The average price target among the 43 analysts covering NFLX stock is $305, suggesting just 4.3% upside. Morningstar analyst Dan Romanoff says Microsoft’s pivot to cloud services and subscription software has the company well-positioned to continue to thrive. If you follow the financial or business news, you may have seen or heard the term FAANG thrown around. It’s an acronym that stands for five big companies — some might say the big companies — in the high-tech industry. Jim Cramer used the term on his CNBC show, Mad Money, in 2013 as he offered praise for how well each company did in its respective field on the market.
- Understanding how to calculate outstanding shares for a public company would appear to be a simple matter.
- The company also operates a gaming segment led by Xbox and Activision Blizzard and an advertising business across its search engine, web portal, and LinkedIn social network.
- Their substantial growth has been buoyed recently by high-profile purchases made by large and influential investors such as Berkshire Hathaway (BRK), Soros Fund Management, and Renaissance Technologies.
- In August 2018, for example, FAANG stocks were responsible for nearly 40% of the index’s gain from the lows reached in February 2018.
- Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns.
Microsoftis the world’s largest software company and the parent company of the Windows operating system, LinkedIn professional social media platform and Xbox gaming brand. The changing environment has prompted Cramer and other tech investors to champion a new acronym for top tech stocks. While Netflix’s market cap has tumbled to just $130 billion, software and cloud services giant Microsoft (MSFT) has grown to a more than $1 trillion valuation. The search platform contributed $104 billion to Alphabet’s total sales in 2020, making up half of the behemoth’s total revenue.
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Wayne Duggan has a decade of experience covering breaking market news and providing analysis and commentary related to popular stocks. News & World Report and a regular contributor for Forbes Advisor and USA Today. Big tech stocks have taken a hit in 2022, and each of the MAMAA stocks is down at least 13% year-to-date. Tech stocks have been among the top-performing investments over the past two decades, but the tech rally has hit a wall in 2022. Apple is a leader in selling personal electronic devices that include computers, smartphones, smartwatches, and accessories. Apple also makes money through certain subscription fees, such as its iCloud data storage service and Apple Music platforms.
Facebook made headlines in February 2022 when it lost $232 billion in value in one day when its stock dropped from $323 per share to $237 per share. It’s so popular that the word “Google” was actually added to the dictionary in 2006 because everyone says “Google it” when they want to perform an online search. However, Alphabet, the parent company, also owns Fitbit and Nest, selling hardware for people to more easily access or manage the information they acquire when working out or doing home activities. Microsoft is not a FAANG stock, which is why there is no “M” in the acronym. FAANG stocks were meant to describe hot, new high-growth tech companies of the 2010s. The percentage of the S&P 500 market cap comprising FAANG stocks varies, but as of late 2023, it was close to 20%.
However, its metaverse-focused business, Reality Labs, has lost more than $21 billion since the beginning of 2022. “Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Kiplinger is part of Future plc, an international media group and leading digital publisher. The average return during this period for FAANG stocks is a sizzling 755%. Profit and prosper with the best of expert advice – straight to your e-mail.