FANG is an acronym first coined by CNBC’s Jim Cramer in 2013. The acronym stands for Facebook, Amazon, Netflix, and Google. These 4 innovative companies were dominating the conversation and the market at the time. The acronym quickly caught on and became common lingo in the investing industry.
Eventually, FANG grew to FAANG to include an “old tech” company Apple. Shortly after, the Twitterverse of investors started to throw Microsoft in the mix due to the resurgence of that company's stock and the overall rebranding of Microsoft to once again be “cool”. At this point, the acronym was getting a little silly and was technically FAANGM but everyone just kept saying FANG.
What was not silly was the growth and performance of these companies from 2013 until December 8, 2021. Facebook has had the worst performance with an average annual return of 23.70% while Netflix has had the best with 37.47%. Meanwhile, the S&P 500 returned 14.86% during the same time period.
The sheer growth of these companies, and more importantly the impact they have on our daily lives, cannot be overstated. Additionally, many investors are most likely unaware of the impact these companies have on the overall stock market. Many indexes such as the S&P 500 (and by extension the funds that invest in it) are market cap weighted. This means that the bigger the company the larger an impact it has on the performance of that index. These 6 companies make up approximately 23% of the S&P 500. Let me state that in a different way: the S&P 500 is made up of 500 companies, but 6 companies are responsible for 23% of the movements in that extremely important index.
Now I would argue that an investor should not have 23% of their portfolio in 6 companies, even 6 companies with as robust businesses and financial positions as these companies. In fact, FSG manages portfolios in a way that protects against over concentrations such as this.
With that being said, these companies deserve our attention and respect, and because of that I think an acronym is warranted. The problem we now face is that two of these companies have changed their name, so we must develop a new acronym. Google is now known as Alphabet and Facebook recently announced they are changing their name to Meta. So we are losing G and F but gaining A and M. I’m just a humble financial advisor from Michigan, but I feel very strongly that the new acronym should be…….. MA MAAN pronounced of course similar to My MAAN!
If you were not up to date on the latest in financial/investing acronyms… now you are. Have a Happy Holiday Season!
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Written by: Brice Carter