The term FAANG refers to a select crew of mega-cap tech giants that have dominated markets and mindshare over the past decade-plus. But what exactly comprises these FAANG stocks? The acronym captures the ticker symbols of these heavyweight champions:
- F – Facebook (now Meta Platforms, ticker FB)
- A – Apple (AAPL)
- A – Amazon (AMZN)
- N – Netflix (NFLX)
- G – Google (Alphabet, GOOG and GOOGL)
Over time, these firms have morphed into bellwethers of tech innovation and economic dynamism, consistently churning out impressive gains for investors. These stocks remain core pillars in countless portfolios and show no signs of fading from prominence any time soon. It’s worth noting that the original label “FANG” left out Apple, only later added to reflect its clout, while Google’s rebranding under Alphabet and Facebook’s evolution to Meta Platforms underscore the acronym’s slight obsolescence.
The Evolution of an Acronym
The initial quartet known as “FANG” spotlighted Facebook, Amazon, Netflix, and Google before Apple barged in as a second “A.” Occasionally, the roster swells to include Microsoft, shifting the mnemonic into “FANMAG,” a smoother-sounding jumble. For a bit of linguistic whimsy, some have joked about “MANAMA,” evoking a nostalgic Sesame Street tune, neatly slotting in Meta Platforms and Microsoft each with their own M.
Why Do These Stocks Command Such Widespread Appeal?
The magnetism of FAANG stocks lies largely in their powerful growth trajectories and expansive market capitalizations, which combine to make them almost indispensable to investors. Collectively, their valuation scales into multiple trillions of dollars. Many shareholders own a piece of this tech pantheon simply by holding a slice of the S&P 500, a benchmark encompassing roughly 500 of America’s corporate giants.
Below is the approximate breakdown of the FAANG components within the S&P 500 as of July 20, 2023, sourced from Slick Charts:
- Facebook/Meta Platforms – 1.8%
- Apple – 7.6%
- Amazon – 3.2%
- Netflix – 0.6%
- Google/Alphabet – 1.9%
- Microsoft – 6.9%
The influence of these giants escalates even further within the Nasdaq 100 index, as revealed by July 20, 2023 data:
- Facebook/Meta Platforms – 4.4%
- Apple – 12.1%
- Amazon – 6.7%
- Netflix – 1.4%
- Google/Alphabet – 7.3%
- Microsoft – 13.1%
Altogether, the core five FAANG stocks occupy roughly 32% of the index’s weight. Factor in Microsoft, and these six heavy hitters collectively command nearly 45% of the Nasdaq 100’s total valuation.
The Impressive Growth Chronicles of FAANG
Though the average consumer recognizes these brands by name, few fully grasp the magnitude of returns these titans have generated over the last decade-plus. From January 2012 through December 2022, the following total and annualized returns put their growth prowess on full display:
| Facebook/Meta Platforms* | 871 | 23.0 |
| Netflix | 2,879 | 36.1 |
| Google/Alphabet | 446 | 16.7 |
| Microsoft | 824 | 22.4 |
*From IPO date: May 18, 2012
Imagine a $10,000 stake in Netflix right at the dawn of 2012 metamorphosing into nearly 29 times that by the close of 2022 — truly mind-boggling. Even the more modest growth figures look enviable in the broader market context. Annualized returns here approach the zenith of what investors typically hunt for.
Diversification Beyond the Flagship Brands
The bedrock of these returns lies in the global empires these companies have steadily constructed. Many are surprised to learn that these tech behemoths don’t just stop at their headline products:
- Meta Platforms boasts ownership of WhatsApp and Instagram alongside Facebook.
- Amazon reigns not only over ecommerce but also commands AWS (Amazon Web Services), a titan in cloud infrastructure.
- Netflix has transitioned from pure content distribution to also producing original shows and films.
- Apple and Alphabet maintain their iconic status with iPhones and search engines but operate far beyond these familiar faces.
Throughout the past decade, FAANG stocks have entrenched themselves as top-tier investment staples, offering some of the market’s most tantalizing upside. While the horizon may not shine quite as vividly as before, these names are poised to endure within major indexes — ensuring their continued presence in portfolios worldwide.
Important Advisory
Prospective investors are strongly encouraged to carry out their own thorough analysis before committing capital. Historical performance, no matter how stellar, is not an assurance of future results.