FAANG Stocks : Best-performing Tech Stocks of the World

18 Sep 2021  Read 1536 Views

Years ago, Arthur C. Clarke said, “The only way to discover the limits of the possible is to go beyond them into the impossible.” The Information and Technology industry has undoubtedly made a mark by reaching beyond the stars in the past decades, and nothing can beat its growth at this point.

Transforming almost every domain of life, the Technology industry has brought about a revolution in all sorts of business cultures and paved the way for limitless and diverse business models. (You gotta keep up with a lot these days!) Changed has the view of functioning and delivering value to customers. In fact, a key belief of millennials is that technology is the answer for most of the emerging business problems.

Behold, as we investigate thoroughly, the global giants of technology, a.k.a., “The FAANG Stocks.”

Overview of Technology Industry

The technology industry comprises the diverse business model that creates and adds value using technology to leverage human capital. These are generally capital intensive in nature. In 2020 itself, IT accounted for 8% of India’s GDP. (That’s certainly A LOT!). The BPM (Business Process Management) sector in India currently employs more than 1.4 million people, while IT and BPM together have more than 4.5 million workers as of FY21.

Whereas talking about the US economy, employment in the IT and computer services sector is projected to grow at 11% from 2019 to 2029, faster than the average of any other sector. Also, the US is the largest tech market globally, representing 33% of the total, which sums up to $1.6 trillion for 2021.

Now that you have seen a glimpse of the global technology landscape, let’s look at the tech giants of the world:

Facebook

Founded in 2004, Facebook, a.k.a., FB was the brainchild of Mark Zuckerberg. Now, the company generates the majority of its revenue from selling advertisement placements to marketers. Facebook has a broadly diversified umbrella portfolio of products and investments, with Facebook Messenger, Facebook Watch, and Facebook Portal being only a few of them.

It has also acquired Giphy and Mapillary and has a 9.99% stake in Jio Platforms. Since 2012, when it filed for an IPO, it has generated around 10x returns for the investors who were allotted the shares. (Damn!)

Metric

Data Point

M Cap

1.06 Trillion

PE Ratio

28.01

Operating Profit Margin

42.52

ROE

31.3%

Amazon

Jeff Bezos laid the roots of this company in a garage in Washington. Over the years, one significant thing that this brand has created is that it’s now a synonym for disruption of established business models (Destruction mode on!).  It has left no stones unturned and unexplored right from e-commerce, cloud computing, digital streaming, artificial intelligence, and countless other domains. It’s like whatever business you are in, you gotta fear Amazon!

Amazon has been referred to as one of the most influential economic and cultural forces globally, alongside being the world's most valuable brand.

Metric

Data Point

M Cap

1.75 Trillion

PE Ratio

60.05

Operating Profit Margin

6.68 %

        ROE

31.2%

Apple

Incorporated in 1977 by Steve Jobs and other co-founders, Apple specializes in consumer electronics, computer software, and online services (We know you already know :)). As of 2021, Apple is the fourth-largest PC vendor and smartphone manufacturer by unit sales IN THE WHOLE WORLD!

Time and again, Apple has had challenging competitors like Microsoft, Intel, and many others. It has always instilled technological upgradation and advancement more than its peers, making it a status symbol for multiple decades now, which is why it could capture the elite market segment.

Apple created its fortune under the revitalizing "Think different" campaign, launching the iMac and iPod, opening a retail chain of Apple Stores in 2001. In 2007, the company launched the iPhone to critical acclaim for its legacy and financial success.

Metric

    Data Point

M Cap

2.44 Trillion

PE Ratio

29

Operating Profit Margin

28.8 %

        ROE

127.13 %

Did You Know?
Apple stock makes up to 42% of Berkshire’s equity portfolio, 6% upside than what it was in 2016. Isn’t this ironic that the man who preaches not to put all the eggs in one basket has overinvested in Apple? Does this fail the rule of diversification? Make of it what you will.

Netflix

Headquartered in California, United States, Netflix was founded in the year 1997. Initially, it started its business by DVD sales and rental by mail facility. We loved it then, and we love it now.

However, the company is currently a subscription-based streaming service provider offering online streaming from a library of films and television series. 40% of this library is produced in-house. It is the largest Media & Entertainment company by market capitalization.

Metric

Data Point

M Cap

255.7 Billion

PE Ratio

59.87

Operating Profit Margin

22.03 %

        ROE

37.86 %

Did You Know?
Netflix spends more than $150 million on improving their recommendation system every year, trying to arrange selections based on what they think you might binge!

Google

Operating currently under the leadership of a legend of Indian motherland Mr. Sundar Pichai, Google is like the synonym of the internet.

Google has its arms spread wide across all spheres of modern applications and services that engage its users.  Youtube, Google Drive, Gmail, Google Cloud Services, Chrome, Google Docs, Google Sheets, and whatnot, you name it, you get it.

Google is the largest subsidiary of Alphabet Inc. The company also holds the credit behind the development of android phones. Google is currently the third most valuable brand, next to two both the As from FAANG.

Most of what the behemoth Google has achieved over the years can be attributed to its founders. Once Larry Page, one of the founders of Google, was asked why he didn't sell his business. He answered- “If we were motivated by money, we would have sold the company a long time ago and ended up on a beach.” (Respect!)

Metric

Data Point

M Cap

1.9 Trillion

PE Ratio

31.11

Operating Profit Margin

28.45 %

        ROE

28.29 %

Did You Know?
As of June 2021, Google has a 92.47% market share in search engines.

FAANG Stocks - The gospel of surging returns

Warren Buffett was once asked what he thinks about the crazy valuations of these tech stocks. He was prompt and subtle to respond that “We don't feel these are crazy,” they have created their value and outperformed the S&P 500 index.

Cumulatively the stocks amount to around 19% of the S&P 500, combining for a market capitalization of 7 Trillion, factoring multiple times growth in the past. Hence, considering the past trends and the likelihood of these stocks’ research and innovation on the platter, the price headwind only seems to blow towards the north. Each of the FAANG stocks dominates its domicile. Moreover, all the brands are amongst the toppers in the fortune 500 most valuable brands list, another evidence for the value they hold. (Presenting to you, the High-Horse Cult, Ladies, and Gentlemen!)

Now that you have tasted the salt of success for your portfolio, what are you waiting for? RBI also mandates and permits individuals to invest overseas, as per the Liberalised Remittance Scheme, every Indian individual can invest overseas up to $250,000.

How to invest in FAANG stocks?

There are various options available to invest in FAANG stocks; out of them, the easiest one is to invest in mutual funds (like Parag Parikh’s funds or Mirae Asset’s ETF FoF) that have international exposure. Another way to invest in Faang stocks is to visit global platforms, which enable investors to invest directly in stocks and ETF's that are traded on the US stock exchange.

To know more about investing in FAANG stocks and international equity, in general, you can read our previous blog.

Conclusion

Investing in FAANG stocks gives us an opportunity to invest in our tomorrow, and it is either the present or the future where wonders happen because the past is beyond our grit. These tech giants are the ones most tracked and looked up to by analysts and retail investors. Most of these are low dividend yielding and high growth delivering stocks (probably the most consistent and highest). Investors that look for capital appreciation in their portfolio may take exposure in FAANG stocks.

About the Author: Aakarsh Bedi | 11 Post(s)

Aakarsh is pursuing his post graduation from N.L. Dalmia Institute, Mumbai with his major specialization being accounting and finance. His curiosity for content writing has made him put together series of articles for diverse magazines. He considers penning down his thoughts as a soul relieving activity.

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