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FAANG stocks

When you think of technology companies, a trader’s mind may think of the FAANG acronym: five of the world’s most important tech stocks. This is comprised of Facebook, Amazon, Apple, Netflix and Google (now called Alphabet).

It goes without saying that these tech giants hold blue-chip status​ in the world of trading and finance. FAANG stocks are some of the most commonly traded within the share market​ and have some of the largest market capitalisations in the world, with three companies having made it past the trillion-dollar mark. The acronym was first coined in 2013, but with the shorter title of FANG, until financial analysts added Apple to the list in 2017.

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What does FAANG stand for?

FAANG is an acronym for the five biggest companies in the world within the tech sector. These shares are featured on the largest US stock indices​, acting as benchmark for their industry. Notable indices include the Dow Jones Industrial Average (Dow 30) and S&P 500, which are two of the most reputable indices that traders look to when choosing a share. In particular, FAANG companies make up approximately 15% of the S&P 500 index, which is a heavy weighting, considering that there are 500 companies on the overall list.

FAANG stocks are most commonly traded in the long-term, due to their status as being some of the most reliable and stable. Although it is possible, it is less likely that these technology stocks will collapse in a market crash or period of recession, which helps to explain their endurance. Traders can either choose a long-term strategy, such as position trading​, or some may prefer to trade FAANG stocks in the short-term, with day trading​ or scalping strategies. When the stock market is volatile, or certain FAANG companies are affected by fundamental factors such as earnings reports and other news releases, FAANG share prices have the potential to soar or drop within a short period of time.

Why is Microsoft not in FAANG?

FAANG companies are said to be representative of predominantly mobile software, such as mobile advertising (Facebook), e-commerce platforms (such as Amazon) and over-the-top media services (such as Netflix). Therefore, when the list was first introduced, Microsoft was not included, as it focused on desktop applications. FAANG is also representative of some of the fastest growing tech stocks of the decade, and since Microsoft was already popular before, it is not considered to have had the same growth potential over recent years.

However, some believe that this is unfair, as Microsoft has one of the largest market capitalisations in the world, even above Netflix, Alphabet and Facebook. Financial analysts have created various other acronyms where the tech giant is included, such as GAFAM and FAAMG (in replacement of Netflix).

FAANG companies: a breakdown

1. Facebook

Facebook is a social media corporation, based in California, USA. Created in 2004 by Mark Zuckerberg as a small social network for students of Harvard University, it has since expanded its audience to around 2.8 billion users, as of 2021. Facebook has also acquired two of the largest social media networks since 2012, WhatsApp and Instagram. Facebook’s share price is around the highest figure it has ever been, and it has a forward revenue growth of around 20%, which is a very promising figure for its future performance. Furthermore, has one of the steadiest balance sheets and cash flows of all FAANG stocks, meaning that it will be less affected by economic uncertainty than the others.

Market cap: $760.64 billion

Share price: $268.29

P/E ratio: 26.48

Facebook share price >​​

2. Amazon

Amazon is a multinational technology company that focuses on e-commerce, digital streaming and distribution and logistics, based in Seattle, USA. It is one of two companies on this list that focuses on multiple industries. Launched by Jeff Bezos in 1996, Amazon started off as a modest marketplace for books, and is now the world’s largest online retailer, selling electronics, furniture, food and many other products. Not just a leader within the e-commerce sector, Amazon also runs its own streaming service with Amazon Prime Video, which has risen to be a top streaming stock​​ in recent years. It has one of the highest P/E ratios for tech stocks in the world, signalling its potential continuation for growth in the upcoming months.

Market cap: $1.67 trillion

Share price: $3,320.85

P/E ratio: 79.39

Amazon share price >​​

3. Apple

Apple is a major, if not the largest, world contender of consumer electronics, including mobile phones and computer software. It was founded in 1976 and currently has headquarters in California, USA. Apple is also a leader in cloud computing and online storage with its own trademark, iCloud, which is available not only for iOS users, but also for Windows devices. Apple was the first US company to reach the 1 trillion-dollar mark in 2018, setting a milestone for its technology competitors to reach. It was not originally included on the FANG stocks list, but was added in 2017 after consistent promising revenue growth and earnings reports.

Market cap: $2.29 trillion

Share price: $136.49

P/E ratio: 37.09

Apple share price >

4. Netflix

Netflix is a technology and media services provider, created in 1997 and currently headquartered in California, USA. Netflix is perhaps the most popular streaming service within its sector, even more so that its rival Amazon, with approximately 204 million users, as of 2021. It is perhaps one of the more volatile shares on this list, as market analysts often overestimate its performance, which is contradicted in earnings reports. News releases, in turn, tend to have an effect on its share price, which can shake the tech market and stock indices that it is featured on. However, the company is experiencing a growth of around 22% per year, indicating that it has a strong performance within the FAANG stocks, and this is backed up in its high P/E ratio.

Market cap: $242.18 billion

Share price: $546.68

P/E ratio: 89.93

Netflix share price >

5. Alphabet (formerly Google)

Alphabet was created as part of a restructuring of the Google subsidiaries in 2015, and is now the parent company of Google, headquartered in California. Google is the largest search engine in the world, claiming approximately 92% of all online search volume in recent years. The holding company owns businesses within many different sectors, including Nest (home products), Verily (life sciences), GV (venture capital investments) and the world’s largest online video-sharing platform, YouTube. Alphabet’s share price is at an all-time high, even though digital advertising slowed due to economic restraint, as it was able to make up its earnings through its cloud computing software and YouTube.

Market cap: $1.39 trillion

Share price: $2,069.75

P/E ratio: 35.32

Alphabet share price >

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FAANG stocks performance

Overall, FAANG stocks are some of the best performing stocks in the share market. The total FAANG market cap equates to around $4.5 trillion and individual FAANG share prices have a heavy influence on the performance of its constituent indices, such as the Dow 30 and S&P 500. Read more about index trading​​ here.

How to invest in FAANG stocks

One way to invest in FAANG stocks is to buy and sell the shares​​ through a stock exchange, such as the London or New York stock exchanges. This can be done through individual stockbrokers and will require you to pay the full value of the position upfront, which can amount to a large deposit of capital.

An alternative is to speculate on the price movements of the underlying shares through derivative products, such as spread bets and CFDs. These allow you to trade on margin, which means that you only have to deposit a fraction of the full trade value in order to get better exposure to the market. Leveraged trading​ comes with risks, however, so you should familiarise yourself with execution and order types before opening a potentially risky position.

To get started trading on FAANG share prices, simply follow the steps below:

  1. Open an account to trade on the price movements of FAANG stocks.
  2. Choose your product between spread betting and CFD trading. Spread betting is a tax-efficient* way of trading in the UK and it is our main product.
  3. Research the stock you want to trade and decide whether you want to go long and buy or go short and sell.
  4. Find a trading strategy that suits you, whether it is in the long-term or short-term.
  5. Don’t forget to use risk management tools, such as stop-loss and take profit orders, in order to minimise capital losses.

‘Big Tech’ share basket

Another way to invest in these technology giants is through share basket trading​, our new product that allows clients to speculate on the price movements of a basket of stocks, rather than only one security. This is also through spread betting and CFD trading, in a similar way to share trading. In particular, our ‘Big Tech’ basket allows you to trade with leverage on the price movements of the underlying shares, which include FAANG constituents Apple, Alphabet, Facebook and Microsoft, as well as other names within the tech market, such as Adobe, Oracle, Cisco, Salesforce and IBM.

For a full breakdown on each component and their constituent weighting, view our instrument page for the Big Tech share basket​.

FAANG ETFs

It is also possible to invest in FAANG stocks through ETF trading. Exchange-traded funds​​ are investment funds that hold a collection of underlying shares within a particular sector and track their performance over time. You can spread bet or trade CFDs on popular ETFs that track the price movements of underlying FAANG stocks on our platform, which include the following:

Future of FAANG stocks

The world of technology is always changing with new developments within the sector, and so are the companies that we consider ‘tech giants’. While FAANG stocks still promise value for investors and traders alike, undoubtedly, there will be a new boom of tech stocks within the next decade that promise equal growth.

For example, some traders believe that FAANG stock performance is slowing and we should instead look for new and fresh options. The acronym TAND is becoming more popular, which stands for Tesla, Activision, Nvidia and Disney, which could be the next FAANG stocks for a new generation of traders. However, for the foreseeable future, the above list of the big five tech stocks may continue to deliver within the technology market.

FAANG news

Our award-winning online trading platform​* comes with a wide range of news sources for traders of all experience levels. Our news and analysis​ section is updated in real time with observations from our market analysts so that you do not to have do as much research. In addition, our news and insights​ section that is available when you register for a trading account provides news commentaries from Reuters, market data, key economic announcements and fundamental analysis reports on the stock market from Morningstar.

Another way to keep informed with the latest FAANG news is through our economic calendar​​, which provides updates on fundamental data that may have an effect on a FAANG stock’s performance, such as business inventories and earnings reports. The calendar can be personalised to suit your trading style, with the option to filter by country, timeframe and economic indicator.

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CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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