FAANG is a widely known acronym in the financial markets. Let’s find out together what does it mean and how it came to be.
What does FAANG stand for?
FAANG stands for Facebook, Amazon, Apple, Netflix, and Google (A is the acronym for Alphabet, Google’s parent company). These are all blue-chip stocks so popular that the media invented an acronym for them.
Who exactly came up with the term?
Jim Cramer (co-founder of TheStreet.com) is “responsible” for inventing the term. Back in 2013, he first used the word FANG to describe high-growth Internet companies. As an interesting fact, Apple wasn't included in the group at the start. It was added in 2017, at the request of Wall Street.
Throughout the years, Jim Cramer suggested different changes, such as removing Netflix and replacing it with Microsoft or adding Walmart to form a new group with Apple, Netflix, and Google (WANG).
More about the FAANG group
In the last decade, FAANG stocks have outperformed the USA 500 Index and the USA 100 Index by a considerable margin. According to fool.com, since March 2009, the worst performing FAANG stock, Apple, has returned more than double of the USA 500 average.
The original four FANG stocks were all internet-based companies. With the later inclusion of Apple, a hardware manufacturer, FAANG turned into a broader group of technology stocks.
Let’s extend our discussion about each member of the FAANG group.
1. Facebook (FB) owns two of the world's largest social media apps: its namesake, Facebook, and Instagram. The company also owns two of the biggest messaging apps, WhatsApp and Messenger. Facebook makes money by displaying ads to users while they browse through feeds of photos and videos.
2. Amazon (AMZN) is the world’s largest business-to-consumer e-commerce company. Its Prime membership program alone boasts over 150 million global subscribers, and the numbers appear to be rising. According to Amazon sources, more people joined Prime during the fourth quarter of last year than any other quarter in the company's history. Additionally, Amazon is involved in cloud computing services and advertising. Still, most of its profits come from the e-commerce industry.
3. Apple (AAPL) is a top smartphone producer that needs no introduction. Device sales (and especially sales of iPhone products) represent the most significant chunk of Apple's revenue. Lately, the company also expanded its activities. It started to include streaming music and video, gaming, news, and cloud storage as part of its offers to clients. As mentioned earlier, Apple was the last company to be added to the FAANG group.
4. When you say Netflix (NFLX), you think of films and TV series. In 2007, the company changed its business model, shifting from a DVD-by-mail service to on-demand streaming. It turned into a pioneer in the industry. In 2012, Netflix began investing in its own original content for the streaming service. Nowadays, the company is one of the biggest buyers of film and television productions globally, serving over 160 million global subscribers. Its films have even won reputed awards, including Oscars.
5. Google is a tech giant that entered the spotlight during the rise of the Internet in the late '90s. The company started as an internet search business. With time, it started acquiring and developing different products, with many of them posting over 1 billion users, such as YouTube. Google also has a growing cloud computing business and a smaller hardware business.
So why is FAANG so important?
The acronym "FAANG" represents some of the most influential tech stocks in the world. They are companies that forever changed the world we live in.
Facebook, Amazon, Apple, Netflix, and Google have been the key drivers of economic growth via the stock market since the last global financial crisis, which ended in 2009. As of March 2020, the FAANG stocks have a combined market capitalization of nearly $5 trillion. That's more than the entire economy of many countries in the world.
To get an even clearer picture of their importance, we’ll end our article with 5 amazing facts about the FAANG group:
• There were 2.6 billion Facebook monthly active users as of the first quarter of 2020. One of every three humans on the planet has a FB account
• Today, more than half the people in America have an iPhone.
• There are more than 160 million Amazon Prime memberships worldwide. Over 112 million are in the U.S. The country has 328 million people.
• 20% of all Internet bandwidth in America is consumed by people watching Netflix.
• Google has nine products with more than 1 billion active users: its Search Engine, Maps, YouTube, Chrome, Android, Google Play Store, Google Drive, Google Photos, and Gmail.
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Sources: fool.com, investors.com, marketwatch.com
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