Best FAANG Stocks (2022)

What are the FAANG Stocks?

The FAANG stocks are a group of technology firms with a market value of about three trillion dollars. The FAANG stocks are made up of Facebook, Amazon, Apple, Netflix, and Google/Alphabet.

The technology stocks that are narrowly focused in the sector, on the other hand, are a significant force behind economic growth. Their sheer size makes any stock price change (up or down) potentially disruptive to the market.

What defines a FAANG stock?

The following companies are divided into two groups: those with substantial market share and, in many cases, insurmountable dominance, as well as strong revenue growth and above-average free cash flow. 

Despite their strong fundamental position, the firms that make up the FAANG stocks continue to be trailblazers in their fields.

• Rather of resting on their laurels and market leadership, these firms are putting their cash reserves to use in cloud computing, artificial intelligence, and other technologies that they believe will continue to boost income.
• Despite their huge size and progress, some of the FAANG firms were also at the forefront of the tech downturn that dominated the market in 2018. In reality, many of the FAANG stocks were in a bear market at year’s end.

Despite the difficulties that still exist, many analysts, particularly sell-side analysts, believe that the stocks have valuations that suggest they could be undervalued and make them potentially a good investment in 2022. Want to research more, then check the how to buy stocks guide.

Introduction into FAANG stock investing

It’s simple to romanticize the past. But few investors would ever guess that the good old days might have been as little as 20 years ago. Consider it for a minute. Since the turn of the century, there has been so much amazing invention that is still ongoing today. Looking for other stocks, then check out the best stocks to buy now guide.

• We realized that having a computer on our phone seemed like something out of the realm of possibility, and we didn’t think about things like social networks or streaming services as viable alternatives to cable and satellite TV. We made a promise to ourselves that we would never buy anything online, and now everything is delivered to our home
• The following are ten firms that have had a significant influence on investors who were wise enough to get in early on these businesses. These companies make up the FAANG stocks.

In this article, you’ll learn what the FAANG Stocks are, why they are newsworthy, the outlook for each stock. We’ll also look at whether FAANG stocks are good investments and how to invest in them (particularly for investors of modest means who don’t want to or can’t afford to buy individual shares).

What are the FAANG stocks?

The acronym FANG stands for Facebook, Amazon, Apple, Netflix, and Google (now Alphabet), which is the name of a group of five major businesses. Aside from the clever name, these five technology firms are linked because they have shown to outperform the market since going public.

• They are also huge. The five FAANG firms aggregate a market capitalization of around $3.9 trillion (nearly $4 trillion). These five businesses account for roughly 13% of the NASDAQ index, in case you were wondering.

Put another way, the collective FAANG stocks’ market capitalization would be equivalent to the world’s fourth largest economy if it was measured in terms of gross domestic product (GDP). When Jim Cramer coined the phrase “FANG” stocks, Apple wasn’t included. Since then, Apple has been joined by Facebook, Netflix, Google and Amazon

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FAANG stocks have a history of outperforming the market

The success of these firms is almost legendary. However, whereas some equities develop and fade as quickly, these businesses have a track record for year-over-year increases in earnings, making them attractive from both a price and earnings (P/E) standpoint. 

These are critical fundamental yardsticks for Wall Street investors and the average citizen on Main Street.

1. However, as the saying goes, outperformance tells you only “what”; it doesn’t tell you anything about “why.”
2. The real concern is why? The attention of Wall Street is drawn to the FAANG stocks due to their ability to capture the thoughts, hearts, and wallets of customers. There’s a decent chance you’re reading this on your phone, tablet, or other mobile device.
3. These are things that didn’t exist 20 years ago. If you’re like many people, you’re probably using the same device to stream content from Netflix or place your orders – which will be delivered right to your house. Simply said, these stocks are popular because they have revolutionized and will continue to revolutionize, technology-enabled consumer interaction processes.

What is the price prediction for the FAANG stocks?

There are “big picture” concerns for every FAANG stock, but because each one of these companies comes to the market in a different way, it’s important to look at each of them individually.

1. Facebook

Facebook is the company that consumers love to hate, according to a poll of 400 people by YouGov. That doesn’t necessarily imply they’ve stopped using the platform (the firm still has 2.27 billion monthly active users) – or its applications. And there’s where Facebook demonstrated its mettle.

• At the end of 2018, four out of the five most popular applications were linked to Facebook, including Facebook, Messenger, WhatsApp, and Instagram. The power of Facebook comes from its ability to attract advertisers. When it comes to attracting attention to advertisements, right now is when Facebook is still far and away the best game in town.

2. Apple

Apple was the first trillion-dollar company (in terms of market cap), but the company did have a rocky fourth quarter. The bad news focused on the company’s outlook for a decline in iPhone sales.

• The iPhone is the company’s signature product and the conventional wisdom was that the new iPhone X would be the next big sales driver. Still, Apple is well positioned to benefit from the rollout of 5G networks (and the associated tech upgrades).
• Plus, despite being the only one of the FAANG stocks to issue a dividend, the company is still sitting on a pile of cash (approximately $237 billion).

3. Amazon

It’s not a good thing when the White House is threatening you with regulation. But that’s to be expected when your company captures 49.1% of all online sales (that’s not a misprint).

• But despite the “Amazon effect” that continues to change consumer shopping habits, Amazon continues to focus on what’s next. In this case, they are making a move to cloud computing, with their Amazon Web Services (AWS) which has become the real growth engine for Amazon.

4. Netflix

Netflix, like Facebook, is not lacking in competition. However, the streaming video service continues to add new subscribers (nearly 7 million in the third quarter of 2018 alone), with much of that increase coming from overseas markets.

• The company is burning through cash, which will be something to keep an eye on – especially given how it has been steadily increasing rates to its customers.

5. Google/Alphabet

With a search market share of over 90%, Google has very little competition. The company maintains its stranglehold on the digital advertising sector. In addition, YouTube is Google’s property, and it is second only to Facebook in terms of active users among social media sites. Google also has a presence in many organizations through its Google suite of services.

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Are FAANG stocks a good investment?

Every year, the same question is asked. The issue is gaining even more attention now that these stocks have been on a wild ride with ripple effects throughout the entire market in 2020.

• After many years of development that looked as though it would never abate, each of these businesses came under strain in 2018. In fact, at the end of the fourth quarter of 2018, every FAANG firm had a market value loss of 20% or more; putting them into a bear market condition.
• To be fair, some of it was profit taking by institutional investors who doubt if even well-managed firms like these can continue to grow earnings at a high rate. The prospect that technology stocks will fall continues to worry investors. Although the expansion of these businesses is important, it’s only one part of the tale.

How to invest in the FAANG stocks?

Every stock in the FANG group is listed on the NASDAQ. The NASDAQ, which has over 5,000 firms, is home to a number of high-profile technology companies. FAANG stocks account for roughly 1% of the S&P 500 Index, which is a broad gauge of the stock market.

At the end of 2018, the FAANG stocks ranked first, third, fourth, ninth, tenth and sixty-seventh on the Index (Alphabet’s Google has two publicly traded share classes accounting for the ninth and tenth rankings).

The FAANG stocks are considered momentum and growth stocks

At the present time, Apple is the only one of the companies that pays a dividend, although there is increasing speculation that other companies, most notably Facebook, may begin to issue a dividend. However, growth comes at a price for individual investors. As of this writing, the stock prices for the FAANG stocks were as follows:

• Facebook (FB)- $170.11
• Amazon (AMZM) – $1,700.98
• Apple (AAPL) – $175.52
• Netflix (NFLX) – $350.75
• Google/Alphabet (GOOGL) – $1,164.22

It also means that buying a single share in each of these companies will set you back $3,561.58. Even if you take into account the fact that these five stocks make up the top five largest in the technology sector, it’s still a significant amount to commit to five equities.

But the bad news is that institutional investors and portfolio managers adore the FAANG stocks, so an individual may profit from investing in a mutual fund, index fund (as long as it follows the S&P 500 Index), or exchange-traded fund (ETF) that includes one.

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Conclusion on FAANG stocks

The FAANG stocks are a group of big-name high-tech firms that include Facebook, Amazon, Apple, Netflix, and Google/Alphabet (Facebook, Amazon, Apple, Netflix, and Google/Alphabet).

• These are the firms you’ve heard about in financial publications that make such claims as “It’s like getting in on XX at $5 per share.” And, for investors who were lucky enough to get these stocks when they first went public, there have been spectacular results.
• In 2020, the sheer size of these businesses and their influence on the stock market was in full display, with big swings that disrupted the broader market.
• The ups and downs in these equities were a result of privacy concerns, the continuing trade conflict with China, interest rate fears, and growing concern over whether or not they would be subject to stricter oversight.

Are FAANG stocks worth buying?

The FAANG stocks have significantly outperformed the broader market for more than a decade. Conservative growth forecasts from two FAANG stocks serve as the perfect opportunity for investors to pounce. Meanwhile, one FAANG stock is facing two headwinds that could seriously hinder its near-term growth prospects.

Is it safe to invest in FAANG?

Are FAANG companies a good investment? FAANG stocks have historically outperformed the S&P 500 index. As of July 2021, the worst-performing FAANG stock, Alphabet, has returned more than double the index average since the market bottom in March 2009

Do FAANG stocks pay dividends?

Amongst the FAANG stocks, the only company that pays dividends is Apple.

Which FAANG company pays the most?

Compensation at Google is one highest in comparison to Amazon, Microsoft, Apple and Facebook. For example, Google pays around $191k for an entry level Software Engineer, compared to an average of $173k at all FAANG companies.

Why do FAANG companies pay so much?

The high growth and liquidity potential of the equity component of salaries offered by top tech companies make compensations offered by FAANG companies much higher than that of a startup or Tier-2 company.

Are FAANG stocks growth or value?

The FAANG stocks are often considered growth stocks, but their deep pockets, wide moats, and recession-resistant businesses also make them reliable defensive plays during market downturns.

How do I invest in Faang stocks?

Investing in FAANG stocks can be done in either of the two ways. One can either invest through an online broker like eToro, mutual funds or index funds. The other way is to invest directly in these stocks through their stock broker.