If you follow the financial or business news, you may have seen or heard the term FAANG thrown around. No, it's not a misspelling of an animal's tooth. It's an acronym that stands for five big companies — some might say the big companies — in the high-tech industry.
The FAANG quintet consists of:
These corporations — all American, but with a global presence — are not only household names, they're financial behemoths. Their combined market capitalization is over $4 trillion. The blue-chip stocks of the
FAANG actually began as FANG. The origin of the acronym has been attributed to Jim Cramer, the financial TV host and co-founder of The Street.com. Known for his slangy abbreviations and catchy phrases, Cramer coined the term in 2013 to represent four
Cramer's original term was just FANG — it didn't initially include Apple. The company joined the ranks in 2017, reflecting the growth of internet services (iCloud, Apple Music, Apple Pay) to its revenues. So the acronym became FAANG.
And it's remained so, even though Google's official corporate name is now Alphabet.
They need no introduction: The five stocks of FAANG are all familiar brands, whose products and services permeate our lives daily. They are also American corporate success stories — each has seen its stock shares experience triple-digit growth since 2015, and year-to-year as well.
Just to put these numbers in context: the S&P 500 has grown 57% in the last five years. So FAANG stocks have been at the forefront of the longest bull market in US history, significantly outperforming the overall market.
For investors, the tech sector has become increasingly important as a wave of high-technology companies have recently gone public through initial public offerings (IPOs) or SPACs. Tech stocks are now the go-tos if you want capital appreciation in your assets — and be in on the next big thing.
While the FAANG stocks are fairly mature companies, they still seem to have a great capacity for growth. They dominate the technology-oriented Nasdaq Composite Index. And the fact that they account for roughly 15% of the S&P 500, a bellwether for the entire stock market, means their performance often heralds trends in the US economy as a whole.
There are several ways to sink your investment teeth into FAANG.
The FAANG gang is viewed by many as modern-day blue-chip stocks, not just tech companies. Facebook, Amazon, Apple, Netflix, and Google are firms that retail investors know and interact within their daily lives.
FAANG stocks have done well over the last several years, often beating the standard indexes. They also led the stock market's rebound during the Covid-19 pandemic in 2020. While historical growth isn't a clear predictor of future growth, it does appear these tech stocks will continue to have a broad influence over the market in general, given their substantial presence in the S&P 500.
However, these stocks are expensive, trading for more than $100, sometimes even $1,000, per share. An alternative option for investors is to find the next high-growth, market-moving stocks.
Given the influence of tech across industries and the recent string of IPOs, maybe there will be a new acronym in the near future.
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