Whisky, cheese and pickles only get better with age, but does the same apply to FAANG stocks? In other words, are FAANG stocks getting old, and do we need a ‘new FAANG’?
If the term ‘FAANG’ means little more than vampire teeth to you, let’s get you up to speed: FAANG is an acronym for the most widely known tech stocks, which are Facebook, Amazon, Apple, Netflix and Alphabet (formerly known as Google).
Other variations of FAANG include ‘FANG’ (someone ate the Apple) or FAAMG (Goldman Sachs’ version swaps Netflix for Microsoft).
No matter what the acronym is, such mega-cap tech stocks always exhibit growth, as technology is a growth sector anyway. In turn, for many traders and investors, FAANG is like the ex-partner they go back to when they need comfort and familiarity after a new relationship doesn’t work out.
The said giant tech companies have achieved year-on-year revenue increases and share price appreciation. What’s more, they highly affect the stock market thanks to their weighting in the S&P 500, as they make up approximately 15% of the index’s total market cap.
Considering the above, you might think of these stocks as ‘classics’. But can you even get classic stocks? We’re sorry to break it to you, but the answer is no. There’s no such thing as ‘classic stocks’, as the stock market is very volatile. Even safe havens turn out to be not so safe from time to time.
Even if the FAANG five continues to grow, some market experts have already found the ‘new FAANG’: TAND (Tesla, Activision, Nvidia and Disney).
Shall I wave goodbye to FAANG?
Things change quickly in the normal world, and changes happen even faster in the business world. Ten years ago, Facebook wasn’t even a public company; we just knew it as a social media site for poking our friends and tending to our farms. And Netflix, back then, was still a DVD-by-mail outfit without any original content.
Such companies always look to remain relevant and invest in new technology. However, even highly successful companies and products don’t stay at the top forever. As consumers’ needs change, those creating such needs or finding solutions to problems are in the lead.
For instance, Tesla is still the leader in electric vehicles in a world trending toward lowering carbon emissions. Apple has plans for the iCar – a self-driving or electric car –, but as the details are scarce, it remains unknown if it can compete with Tesla on the field.
It seems that the most remarkable period of growth of FAANG is already behind us, even though they provide consistent growth at scale. But don’t worry: there is still a long way to go before we need to wave goodbye to them for good.
In the meanwhile, why not take the opportunity to speculate on their price? Eurotrader offers FAANG stocks among 2,000+ other instruments to trade as CFDs.