Last Updated on September 20, 2023 by BFSLTeam BFSLTeam
The U.S. stock market is one of the oldest financial markets and consists of some of the most fundamentally strong companies in the world. Investing in the U.S. market can not only help you diversify geographically but also give you access to investment opportunities that are not available in the Indian stock market. Take technology companies, for instance. India doesn’t have many world-class tech companies, whereas the U.S. stock market is filled with many of them. Market experts recommend investing in these tech companies for long-term wealth creation without too much risk. Among the host of technology stocks available for investment, FAANG stocks rank the highest.
What are FAANG Stocks?
FAANG is an acronym that market experts use to refer to the top five technology companies in the U.S. stock market. The list includes Facebook, Amazon, Apple, Netflix and Google. The acronym was popularised in 2013 by Jim Cramer, who was a television host of a popular CNBC TV show ‘Mad Money’.
In the years between 2013 and 2017, the term FANG was more commonly used. But when Apple emerged as a fundamentally strong IT company, the acronym was modified to include it in the list, resulting in the acronym FAANG.
Here’s a quick overview of each of the companies in the FAANG stocks list.
Established in 2004, Facebook is one of the most popular social networking sites in the world. In 2021, the company was renamed from Facebook Inc. to Meta Platforms Inc. This restructuring was primarily done to reflect the company’s efforts to move beyond social media platforms alone, and expand into other technology spaces like virtual and augmented reality.
As of July 24, 2023, the company’s weightage in the NASDAQ 100 index was 3.511%, and its total market capitalisation stood at $750.36 billion. Meta Platform’s subsidiaries include Facebook, Messenger, Instagram, Threads, WhatsApp, Workplace, Mapillary and Horizon Worlds.
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- Amazon
Established in 1994 by Jeff Bezos, Amazon started as an e-commerce company selling music, videos and books online. The company then expanded its business to cloud computing with the launch of Amazon Web Services (AWS) in 2002.
Currently, it is also involved in online advertising, digital streaming and OTT through its Prime Video service and even artificial intelligence (AI). Amazon is widely regarded by many as one of the most influential tech companies in the world. As of July 24, 2023, Amazon’s weightage in the NASDAQ 100 index was 5.132% and its market capitalisation was $1.329 trillion. Amazon is the third-largest among all the FAANG stocks in terms of market cap.
- Apple
One of the most prolific and oldest tech companies in the U.S. and the world, Apple was founded in 1976 by Steve Jobs, Steve Wozniak and Ronald Wayne. The company started its business by manufacturing personal computing (PC) systems. Apple grew by leaps and bounds with the release of the iPhone in 2007.
Since then, the company has been on a strong and consistent growth trajectory. As of July 24, 2023, Apple’s weightage in the NASDAQ 100 was the highest at 11.616%, with its market capitalisation coming to around $3.013 trillion. This makes Apple the most valuable of all the FAANG stocks.
- Netflix
Netflix, the company, was founded in 1996 as a mail-order DVD rental business. With the popularity and accessibility of the internet growing, the company entered into the media streaming and Over-The-Top (OTT) content space. In addition to hosting a wide range of content produced by third parties, Netflix also currently develops its own content under the ‘Netflix Originals’ banner.
Some of its original productions like House of Cards and Squid Game have gone on to become huge hits worldwide. As of July 24, 2023, Netflix’s weightage in the NASDAQ 100 index stood at 1.63% and its market capitalization was $189.83 billion. Among the entire list of FAANG stocks, Netflix is the least valuable in terms of market capitalisation.
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Google, the most popular search engine platform in the world, was founded in 1998. In addition to search engine technology, the company is also involved in artificial intelligence, cloud computing, online advertising, e-commerce, consumer electronics and computer software, among others.
In 2015, the company underwent a significant change in its corporate structure. A new parent holding company called Alphabet Inc. was established. Google and all former Google subsidiaries were transferred to Alphabet Inc and listed as the newly formed company’s subsidiaries. This change in the corporate structure was done to more accurately reflect the diversity in the company’s business. As of July 24, 2023, Alphabet’s weightage in the NASDAQ 100 index was 2.744% and its market capitalisation was $1.532 trillion. Alphabet is one of the most diversified among all the FAANG stocks.
Conclusion
The recent financial struggles of Netflix and the name change of Facebook and Google to Meta and Alphabet have prompted market experts to advocate for phasing out the acronym FAANG. Instead, they suggest using the acronym ‘MAMAA’ (Meta, Amazon, Microsoft, Apple and Alphabet) to represent the top tech companies in the U.S.
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Now, if you’re planning to invest in FAANG stocks, the best way to do it would be through a mutual fund or an Exchange-Traded Fund (ETF). You can gain exposure to all the stocks by investing in either of these options. What’s more, you can even start a Systematic Investment Plan (SIP), which would enable you to invest small sums of money regularly.
On the other hand, if you’re an experienced investor who has a good understanding of the U.S. stock market dynamics, you can consider investing in individual FAANG stocks. But keep in mind that doing so can make your investment portfolio vulnerable to market volatility and adverse market movements.
