Wall Street American shares.

What are FAANG stocks?

In recent years, the so-called FAANG stocks have been the absolute stars of the US stock market. The acronym stands for: Facebook, Apple, Amazon, Netflix and Google. These five prominent US tech stocks have, over the past decade, determined sentiment with their constantly rising prices and made a significant contribution to the returns of the widely used S&P 500.

The well-known investor and television personality Jim Cramer first used the term in 2013 on the US news channel CNBC. He praised the select group of four fast-growing tech companies, which then consisted of Facebook, Amazon, Netflix and Google. In doing so, Cramer pointed to their dominant market position and unparalleled growth. The term was quickly adopted by investors and became synonymous with the huge success of the big tech companies in the United States. In 2017, Apple was added to the group, extending the FANG acronym to FAANG.

By now, the term is somewhat outdated, as Facebook has changed its name to Meta and Google has been part of parent company Alphabet since its restructuring in 2015. Hence, Cramer has come up with a new acronym: MAMAA. This includes the following five companies: Meta, Alphabet, Microsoft, Amazon and Apple. Cramer has replaced Netflix with Microsoft, because Netflix shares have lagged behind the other names in the group. Microsoft has always been mentioned in the same breath as the original FAANG stocks, because of its huge market capitalisation, market dominance and rapid growth. FAAMG shares have also been mentioned frequently.

Buy FAANG shares

It will be some time before MAMAA becomes as established as FAANG. The media continue to use the acronym FAANG and the stocks are still very popular with investors. They are still among the most successful and valuable companies in the world. Each FAANG stock is listed on NASDAQ and is part of the S&P 500 index, which includes the 500 largest US stock market funds. Collectively, the five FAANG stocks account for approximately 15% of the market capitalisation of the S&P 500 and have a significant influence on the price of the index. So when you buy an S&P 500 ETF, you are partly exposed to the price movements of the five FAANG stocks.

In the NASDAQ-100 index, the 100 most traded companies on the NASDAQ, FAANG stocks are even more dominant with a total weight of around 32%. Those who want to get a higher exposure to the five can therefore buy an Exchange Traded Fund (ETF) on the NASDAQ-100.

Of course, you can also buy the individual FAANG stocks. We list the five tech stocks for you.

Facebook (Meta)

Facebook dominates social media. On 4 February 2004, Mark Zuckerberg, together with Dustin Moskovitz, Chris Hughes and Eduardo Saverin, founded TheFacebook.com, a network for Harvard students. The popularity of the site grew quickly and by the end of 2004 there were already 1 million users. Then the name was changed to Facebook. This marked the beginning of an unprecedented growth, partly due to acquisitions of competing social media. With Facebook, Instagram and WhatsApp, Zuckerberg's company has three of the most important social apps in its hands. Facebook continues to grow and by mid-2021, more than 3.5 billion people around the world will be using at least one of its services every month. Facebook alone has 2.9 billion active users.

Apple

Apple is the trendsetter in the technology sector. On 1 April 1976, Steve Jobs founded the company together with his good friend Steve Wozniak. The launch of the colourful all-in-one computer iMac in 1998 was a huge success for the company. This was followed by the music player iPod in 2001, the iPhone in 2007 and the iPad in 2010. The company also introduced the digital music library iTunes and the mobile payment service Apple Pay. Especially the iPhone, which was the first phone with a functioning touch screen, became a huge cash cow for Apple. Since its launch, more than 1.9 billion iPhones have been sold. The smartphone has made Apple the world's largest technology company in terms of revenue. Also in terms of market cap, Apple is one of the largest companies in the world.

Amazon

In a quarter of a century, Amazon has developed from an online bookstore into an Internet conglomerate with an astronomical stock market value. Millions of products can be found in the online shop. In addition, the Whole Foods supermarket chain, Amazon Prime Video video streaming service and Amazon Web Services (AWS) cloud service belong to the group. AWS was founded in 2003 and is currently Amazon's most important mainstay. Large companies such as McDonalds, Volkswagen and Airbnb are customers. Besides cloud services, Amazon earns a lot with Prime subscriptions and advertisements. These activities exceed the profits of the e-commerce branch. Nevertheless, the web shop also continues to grow rapidly.

Netflix

Netflix has been growing like a coalition for years, but is finding it increasingly difficult to maintain its high growth rate. At the end of 2021, the company had almost 222 million subscribers and wants to increase this to 500 million over time. The growth must come mainly from Asia, because the subscriber base in North America is stabilising. For a long time, the streaming service had a head start on the competition, but now sees more and more parties entering the market. In Asia, for example, the company is increasingly facing competition from regional or major foreign players. Disney, for example, is launching various locally produced series for the Asian markets. Amazon and Apple now also offer video services and have deep pockets for top productions. And Netflix has noticed this. For the first time in over a decade, Netflix experienced a decline in subscribers. In the first quarter of this year, the number decreased by 200,000 worldwide.

Google (Alphabet)

If the nickname Big Tech applies anywhere, it is to Google. With its search engine of the same name and the internet browser Chrome, the company has a dominant market position. In addition, the free mobile operating system Android is used on around 80% of all smartphones sold worldwide. Together with Facebook and Amazon, Google will account for 74% of global online advertising expenditure in 2021. In addition to the search engines, YouTube, which Alphabet also owns, generates a great deal of advertising revenue. Here, the company is working on new forms of content, such as Shorts. This is the TikTok variant of YouTube. As always, Alphabet focuses first on maximising user convenience and then on implementing a revenue model.

Buy FAANG shares

Do you want to invest in any of the FAANG stocks? Would adding FAANG stocks help diversify your portfolio? You can invest in each of the companies individually by buying specific stocks. We do not charge commission on any shares traded on US exchanges. However, please note that there is a foreign exchange charge, a connection fee and a €0.50 external handling fee per transaction. See our tariffs for more information.

We also offer you the option of investing in FAANG stocks through an ETF, for example a NASDAQ ETF or S&P 500 ETF. We even have an ETF Core selection where the commission costs are of the house. View the selection and terms here.

Why invest in FAANG shares at DEGIRO?

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The information in this article has not been written for advice nor is it intended to recommend investments. Investing involves risk. You may lose (part of) your investment. We recommend that you only invest in financial instruments that match your knowledge and experience.

Deemed authorised and regulated by the Financial Conduct Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

Sources: Investopedia, CNBC

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Note: Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products which match your knowledge and experience.

Note:
Investing involves risks. You can lose (a part of) your deposit. We advise you to only invest in financial products which match your knowledge and experience.