In this series, we bust the jargon and explain a popular investing term or theme. Here it’s FAANG.
Why are we discussing vampires?
We’re not – it’s an acronym standing for Facebook, Amazon, Apple, Netflix and Google, the five US tech titans.
Facebook is now called Meta Platforms and Google has become Alphabet, but you get the idea.
When the acronym was coined in 2013 by Jim Cramer, presenter of the CNBC show Mad Money, it was ‘Fang’, then Apple was added in 2017.
Taking a stake: Faang is an acronym standing for Facebook, Amazon, Apple, Netflix and Google, the five US tech titans
Why is the abbreviation so frequently used?
Mostly because it stands in for the tech sector, whose fortunes have dominated the direction of stock markets over the past decade, reflecting the shift to online during that period. These companies also make up a large chunk of many portfolios, and are the largest holdings in many funds popular with private investors.
The combined market capitalisation of the Faangs is about $8trillion (£6.4trillion), of which Apple accounts for £2.1trillion.
Why no Microsoft?
Back in 2013, Microsoft seems to have been considered a bit old tech, although its renaissance was beginning. Cramer has recently revised the acronym to include the resurgent Microsoft and take account of the new names of the other companies.
The updated version is Mamaa – Meta, Alphabet, Microsoft, Amazon, and Apple. Note the exclusion of Netflix, whose market value has shrunk due to the slump in its subscriber numbers.
Will the new acronym catch on?
It hasn’t so far. One reason for this may be the link between the word ‘fang’ and the perception, in many quarters, that the influence wielded by the tech giants was malign and needed to be curbed: Mamaa may sound too benign.
Governments are under pressure to lessen Big Tech’s sway. The EU’s digital markets act is designed to counter their power.
How have Faangs fared lately?
These are unhappy times for the members, which were the monarchs of the markets in 2020 and 2021, when lockdown hugely increased global dependency on their products and services. Their share prices have been hit by the economy reopening, concerns over increased regulation and fears interest rates could rise to fight inflation. Much of their attraction lies in future profits. But these are less alluring if more generous returns are on offer from other investments.
How far have they fallen?
Since the start of the year, the prices of Alphabet, Amazon, and Apple have fallen by 20 per cent, 11 per cent and 16 per cent respectively.
Meta is down 47 per cent, due to lower ad revenue and less usage of Facebook and Instagram. Netflix has fared worst – down 69 per cent.
It’s little wonder that Cramer this week tweeted that he is ‘not a big Faang fan’. But anyone who has, say, held Apple shares since 2017 cannot be too unhappy. The price is 339 per cent higher than at that time.
They may no longer be stock market darlings, but their influence over so many aspects of our lives continues.
There are moves to replace the constituents of the acronym with the following sectors: fuel, agriculture, aerospace, nuclear (and renewables), and gold and other metals. These formerly unfashionable investments have fared better this year and are expected to do so for a while.