The abbreviation FAANG has nothing to do with sharp teeth, although stock trading in this group could be even more exciting than watching Shark Week. While we observe the collective value of FAANG shares soar more than 1500% in the past decade, more and more traders began investing in technology stocks.
But only with any other trading instrument, the first step is to get more information about the trading details of any particular asset. Today we will explore whether FAANG are the best technology stocks to invest in and how to do it correctly.
What are FAANG technology shares?
It’s no secret that some companies do it better than others. And some companies do so well that eventually they begin to control and drive entire economies. Quite logically, traders who put their trust and funds into successful companies increase enormously. But guessing which business will become the next big thing is not so easy.
In order to understand how each specific company affects the local economy and the global trading scene, it is important to be familiar with the industry in which it operates. Then you look around and choose a general path: choose a new company to grow your trade balance along with it or head to the main traffic of large companies that existed for a while. The FAANG group is a great example of why you may not want to look for new technology shares to invest, but focus on well-established ones.
For starters, let’s decode this catchy abbreviation. FAANG is a stock group that includes tech industry giants: Facebook, Amazon, Apple, Netflix and Google. All these names are more than familiar, not even as a merchant, but as a person living in the 21st century. The five companies have a lot of power: from affecting the daily lives of users to changing the course of the global economy and technological development.
Each FAANG group company originated in the United States and is listed on the S&P 500 Index list. S & P is a stock collection of five hundred major US companies. It is legitimately considered one of the major contributors to the U.S. economy. Here are some interesting facts about FAANG:
Originally FAANG was just FANG, as it did not include Apple until 2017
FAANG is not an official market term, but rather a commonly used abbreviation. It was presented by financial analysis television and host, Jim Cramer
The G in FAANG means GOOG or Google, but technically this action represents a conglomerate of the Alphabet technical industry. Google just happened to be one of their first successful projects and the name stayed
As of 2020 FAANG is responsible for 15% of the entire S&P 500 list, making them the most notable stocks in America and the world. FAANG’s current market capitalization exceeds $ 4.1 billion
Traders around the world are divided into two areas of opinion regarding FAANG: some say they are reaching a maximum, while others are sure that five giants will continue to grow
Now that we have established the meaning of FAANG and its overall role in the international trading scene, let us approach each of the five components. As we take a closer look, you will be able to see why they are considered the best technology stocks to invest in.
Why are FAANG companies known?
Most of the world’s population is not concerned about the value of FAANG populations. Not everyone is a trader. But within this particular category of shares, almost all contribute to the overall value and, therefore, the importance of the combined effect of the group on the market.
So you can keep scrolling through the Facebook feed while streaming something on Netflix, without going too deep into how it’s contributing to the global economy. Or you can do the same and take a different perspective: not only enjoy the services offered by FAANG companies, but also actively benefit from their success.
In trading, one of the approaches to forecasting is to analyze past performance. This is exactly what we will do next: look at each of the FAANG companies in terms of their origins and previous achievements.
Who doesn’t have a Facebook profile? This question can be answered approximately with more than 2.6 billion monthly active users who go to the website for communication, work, research and more. Virtually everyone in the world has used or at least encountered Facebook once in their life. In addition to that, FB owns Instagram, What’s App, Messenger, Oculus and 9.9% shares on Jio Platforms.
Founded in 2004 by Mark Zuckerberg and a group of his classmates, Facebook quickly grew in popularity first connecting people based on the school they attended and then almost anyone around the world who wanted to connect. As of February 2012, the social platform had already received 845 million active users and filled an initial public offering seeking to raise $ 5 billion.
Stock trading began a few months later, in May, when NASDAQ welcomed Facebook into the process. Initially the stock had problems slightly, but as it recovered in 2013 it grew almost 400%.
To trade successfully, it is important to understand your general trading scheme. Being an information technology platform, FB gets most of the revenue from ads. Therefore, ignoring policy updates and how they meet the requirements of local and global companies could help a lot during trading. In addition, since it handles massive amounts of private data from billions of users, the company’s position on confidentiality and data processing plays an important role.
For example, in 2018 Facebook was involved in a turnaround scandal. It was made public that Cambridge Analytica harvested personal information from millions of FB users without their knowledge or consent. That information was allegedly used for political purposes, which ultimately put Facebook in a very bad light and caused a $ 100 billion reduction in its value.
The action then picked up slowly, after Zuckerberg voluntarily in front of the US Congress. In June 2020 the FB price reached $228, which is a huge jump from the absolute low of $17 in August 2012.
Have you ever Googled the richest people in the world? If so, you are familiar with the name of Jeff Bezos, founder of Amazon. Bezos is one of the most influential entrepreneurs in the world, who is considered to be on a fast track to become the first billionaire in the history of mankind.
Amazon.com it originated in 1994 as an online bookstore. From the beginning, the company picked up a rapid growth rate, expanding into several areas of e-commerce and becoming one of the most promising technological stocks to invest.
Unlike Facebook, Amazon went public fairly quickly, in 1997. As it grew in the number of products sold and customers engaged, AMZN almost never experienced significant falls in value. Amazon Prime membership has more than 150 million active subscribers, resulting in an equal number of recurring paid visits.
The biggest driver of Amazon stock growth, apart from the company’s exemplary achievements, is a FOMO factor. Fear of getting lost leads traders around the world to constantly include AMZN value increase in their portfolios.
As an example, we can see the announced starting price of $ 18 in May 1997, which did not recover immediately, but tripled over the next decade, becoming $ 68 in May 2007. Anyone investing in AMZN at the time would currently face growth of more than 1300%. In June 2020, the stock price reached $ 2,545 and does not appear to be slowing.
Regardless of which operating system you prefer on your smartphone, you can not deny that Apple is a big problem. The company was founded in 1976 and originally focused on the design and construction of hardware and software. We all know very well that modern Apple is much more than just computers.
With the iPhone being Apple’s most recognizable product, there is a whole segment of electronics that feature a bitten apple on the back. At the moment there are approximately 1.5 billion devices activated all over the map. Over the years, the company grew to become one of the largest and most valuable in the world in terms of market capitalization and revenue. And as of 2018, Apple became the first U.S. public company to value more than $ 1 trillion. So it is one of the most important on the S & P 500 list.
APPL shares were made public in 1980 at $ 22 per share. After the launch of the first computer that did not require the input of a programming language in 1984, the value of the shares began to grow gradually. In the last ten years APPL grew more than 1000%, resulting in the price of $ 338 per share in June 2020.
The most volatile times for APPL actions are scheduled events that include announcements of new and improved products, usually followed by presentations. Depending on the level of Market Revolution, Apple’s trading experts can predict the next market move.
While some Netflix and cold, others Netflix and trade. Although they do not necessarily cancel each other. Just as Amazon started as a bookstore, Netflix was first a DVD about the mail order service, with its direct competitors-Blockbuster. And today Blockbuster has gone extinct, while Netflix has more than 182 million active users worldwide.
Netflix was founded in 1997 and quickly became what it is today. Statistics from 2017 show that Netflix has successfully replaced or combined cable in almost 80% of US households. And in 2018 the Company bit the largest share of streaming video among competitors: 26.6%, while Alphabet’s YouTube gained 21.3% and Amazon Prime Video 5.7%.
The history of NFLX’s actions is less ancient than that of the other members of FAANG. The stock was made public in 2002 at $ 15 per share and, after adjusting the share divisions at $ 1.07. Rapid stock growth began in 2013 when Netflix released its first original content, the House of Cards. Since then, the streaming service is creating its own content and acquiring the most promising creations from major networks, such as NBC.
Netflix also became one of the companies that remained strong during the first stage of the COVID-19 quarantine restriction, which caused a major disruption in the global market. With more people staying at home, often without much to do, Netflix has become a number one subscription option for a large number of new users.
NFLX is also the FAANG group’s best performance. A 2010 trader who would have put his confidence in the shares, will not gather the equivalent of more than 4000% increase, as Netflix went from $ 7.61 per share in January 2010 to $ 418.07 in June 2020.
Alphabet, formerly Google (GOOG)
The verb “Google” has become a part that corresponds to most languages around the planet. As of 2020, the most popular and recognized search engine processes more than 3.5 billion searches per day. But googlear is just a small part of the company behind GOOG and GOOGL.
Google was founded in 1998 by Larry Page and Sergey Brin, doctoral students at Stanford University. It grew rapidly after it was included in 2004. And in 2015 the company restructured and became part of Alphabet Incorporated. In this way when trading GOOG not only trading Google shares, but also the others under the alphabet, which include: Android operating system, Gmail, YouTube and many others.
After filling an initial public offering in 2004, GOOG entered the trading scene at a safe rate of $ 85 per share and began to increase with confidence in value at that time. One of the first waves of mass growth was caused by the acquisition of YouTube in 2006.
One of the notable facts about Alphabet actions is that they fall into three categories: A, B, and C. A class actions listed as GOOGL are typical actions with an action a voting structure. Class A shareholders have the right to participate in the company’s decision-making process. Class B shares are only available to founders and high-ranking experts, these shares are ten shares per vote. Type B shares are not available for public trade. And finally the Class C shares are the most likely to be found, the shareholders of C have no voting rights.
Class C shares are the only ones that are commonly traded, so the price of GOOG is usually the price of Category C. and that price has gone from the initial $ 85 per share in 2004 to $ 1413 in June 2020.
At this point, you have a general understanding of how each of FAANG’s shares participates in the trading process. Now we will talk about whether you personally should invest in technology stocks and what are the crucial steps to do so.
Should I invest in FAANG shares?
From what you have read above, you may now have the impression that FAANG’s shares are steadily rising and overall are a win-win. Which is not exactly the case. Since the group consists of five massive companies, judging them as one is almost impossible. This means that anyone who is looking to invest in technology stocks needs to evaluate all the pros and cons first.
The first thing to understand is that just because all FAANG companies have a record of tremendous growth, it doesn’t mean they grow symmetrically or consistently. For example, Facebook and Google may be experiencing a difficult patch, while Netflix and Amazon are stronger than ever, as in early 2020.
Another factor to consider is the number of regulations associated with the five companies. Growing bigger in your case also means being controlled at higher levels. Increasing levels of forward regulation means less and less room for companies to grow and explore new areas. For example, since the 2018 scandal, Facebook was required to submit evidence to the UK and US governments. In other words, something that would have gotten away with ten years ago is now making its job significantly more difficult.
Then there’s always competition. It is hard to imagine that Google will be replaced as a more popular search engine, but we also know that GOOG’s actions also refer to YouTube. And YouTube is competing with several other services within the FAANG group, such as Netflix, Amazon Prime Video and Apple TV, as well as others abroad, such as Hulu or Disney +.
Depending on the content offered by each of the competitors and how it will be received, the value of each company can go up and down. Therefore, the study of behavior patterns in each category of technology shares to invest in can be very important. That’s why educating yourself about the past performance of FAANG companies is important to get an idea of the overall dynamics, but it can not always be used as an indicator of upcoming success.
Instead, you will need to prepare to master the technical analysis of each particular action and learn to interpret sales reports, major announcements, product launches and others from the perspective of business opportunities. At this point, it would make sense to summarize what you will have to do to successfully invest in technology stocks.
How to successfully invest in technology stocks
FAANG is a group of the best technology stocks to invest, but being the best option does not mean that they absolutely guarantee a stable profit. To successfully invest in technology stocks, you should consider the following:
Before investing in technology stocks, choose the one you will start with. As mentioned above, even the strongest trading instruments have their disadvantages. Start by taking a close look at a particular action and try to gather as much information as possible about what the company is planning to do next. Based on your personal experience and expert opinion, you will get a very good idea of whether the stock is worthy of your attention.
While holding on to a stock will most likely be beneficial in the long term, it may not necessarily be effective during short-term trading periods. This means that if you don’t have much time to wait for the value to rise slowly, you’ll want to choose a stock that is associated with the highest volatility. On the one hand, it is known that FAANG’s actions are very popular, but on the other hand this can change at any time, so you should be attentive constantly.