What Are FANG Stocks?
In finance, the acronym "FANG" refers to the stocks of four prominent American technology companies: Meta (META) (formerly Facebook), Amazon (AMZN), Netflix (NFLX), and Alphabet/Google (GOOG). FANG stocks are famous for the impressive growth they have experienced, with each member's stock price more than doubling at times since 2018.
In 2017, the company Apple (AAPL) was also added by some analysts, resulting in the new acronym "FAANG." Apple's stock price increased more than 300% between August 2019 and August 2024.
Key Takeaways
- The acronym "FANG" refers to the stocks of four popular American technology companies: Facebook (Meta), Amazon, Netflix, and Google (Alphabet).
- Since 2017, Apple has also been included, making the acronym FAANG.
- Each FANG company has shown extraordinary growth, reflected in their revenues and net profits.
- Although their business models vary, they each share the use of advanced technologies to acquire and retain users.
Understanding FANG Stocks
The term "FANG stocks" was initially coined by The Street's Bob Lang and later popularized by Jim Cramer on his CNBC TV show Mad Money. It is now widely used by market commentators and analysts. The stocks referred to by the acronym are all well-known and richly valued technology companies that trade on the Nasdaq exchange, a collection of approximately 4,000 American companies. Many other companies traded on the Nasdaq exchange are also considered growth investments, although very few have matched the impressive growth of the FANG stocks.
Despite their common reputation as successful growth companies, the business models of the FANG stocks are distinct.
Facebook (Meta)
Facebook, for example, is the world's preeminent social networking platform. With a daily average active user base of 3.27 billion people as of June 2024, Meta can claim over 40% of the world's population as its customers. To monetize this extraordinary user base, Facebook sells ads targeted based on users' personal preferences and usage patterns.
Amazon
Amazon, meanwhile, is a leading business-to-consumer (B2C) e-commerce platform that uses leading-edge cloud computing and data analytics technologies to sell a retail catalog. Although Amazon initially pioneered the sale of books online, books now represent much less of its overall product catalog than when it started.
Netflix
Netflix is also known for its impressive customer growth. An online entertainment streaming service specializing in movies and television shows, the company's subscriber base has grown exponentially, from 26 million in 2011 to 278 million in 2024. To compete with new entrants to the streaming market, Netflix also aggressively produces exclusive content, moving beyond its traditional role as a content aggregator to a major content producer in its own right.
Google (Alphabet)
Alphabet has leveraged its core expertise as the world’s foremost search engine, developing a highly profitable online advertising business while driving user retention through popular web applications such as YouTube, Google Docs, and Google Maps.
There are alternative acronyms for clusters of stocks; for example, FAANG incorporates Apple stock.
FANG Stock Performance
With these impressive facts in mind, it is no wonder investors have been enthusiastic about the FANG stocks' business prospects. This enthusiasm has been supported by the companies' financial performance, which has caused substantial increases in their respective stock prices.
For the trailing twelve months (TTM) as of August 9, 2024, Meta reported revenues of $149.8 billion and a net income of $51.4 billion. Meanwhile, Amazon showed an astounding $590.7 billion in revenue and produced a net income of $37.7 billion. Over the five preceding years, these two companies’ stock prices increased by 172.3% and 82.2%, respectively.
Netflix and Alphabet (Google) have also shown strong TTM performance, with Netflix posting revenues of over $36.3 billion and a net income of $7.1 billion. Alphabet generated $328.3 billion in revenues and $87.7 billion in net income. Buoyed by these earnings, Netflix's stock rose by 100.1% over the preceding five years, while Alphabet’s rose by 174.6% over the same time frame.
How To Invest in the FANG Stocks
Since there are only a handful of stocks in the FANG universe, it is relatively easy for investors to trade these names directly with their broker, especially now that many brokers offer zero-commission trading.
As of August 2024, no funds hold only FANG (or FAANG) stocks. Instead, investors looking for ETFs that have heavy weightings of these could look to tech-heavy ETFs such as those that track the Nasdaq 100.
What Does the Acronym FANG Stand for?
The acronym FANG was coined by The Street's Bob Lang and popularized by Jim Cramer on his CNBC TV show Mad Money. This acronym refers to the stocks of four prominent American technology companies—Meta (META) (formerly Facebook), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOG). By adding Apple (AAPL) in 2017, "FANG" became "FAANG."
Why Are FANG Stocks Popular?
FANG stocks are famous for their impressive growth and popularity, with each member more than doubling its stock price at times. However, despite exhibiting growth stock behavior, FANG stocks are not too volatile. This stability, along with delivering superior rates of return, has made these quite attractive to investors.
What Businesses Are FANGs in?
Although they each share the use of advanced technologies to acquire and retain users, FANGs have distinct business models. Facebook is a prominent worldwide social networking platform. Amazon is a leading business-to-consumer (B2C) e-commerce platform. Netflix is an online entertainment streaming service that also aggressively produces its own exclusive content. Alphabet (Google) has leveraged its core expertise as the world’s foremost search engine to develop a highly profitable online advertising business.
The Bottom Line
Meta (Facebook), Amazon, Netflix, and Alphabet (Google) make up the acronym FANG, a group of companies popular with investors due to their phenomenal growth over their lifetimes.
