Inquiring minds want to know

picture by Azzam Quourti on Unsplash

“It’s a sign of true capitulation when investors dump their most valued holdings.” -Michael Hartnett, Head of Strategies at Bank of America

FAANG stands for four big tech companies — Facebook (FB)now Meta, Amazon (AMZN)Apple (APPL)netflix (NFLX)and Google, now Alphabet (GOOG). The referenced term was coined in 2013 by Jim Cramer, who gave the name as a distinction to tech companies dominating in their niches. Jim Cramer originally called it FANG and did not include Apple; he used the term on his CNBC show – Mad Money, in 2013. However, in 2017 he added Apple and named it FAANG.

The term was to show the leading stocks in the market. These stocks were also the best performing technology companies in the stock market. Today, the market value of FAANG shares exceeds $3 trillion. It also accounts for about 10% of the US stock market, which has a total capitalization of $31 trillion. Due to FAANG’s market share in the stock market, its price movement has a significant impact on the market.

Rotation to FAANG 2.0 since the beginning of the year

This impacts everyone, including those who do not own a share of FAANG stock. In my opinion, one of the worst things that can happen to any investor is to invest in FAANG just because it looks like a popular trend. Until recently, FAANG shares had grown exponentially compared to other internet-based companies.

The companies that make up the FAANG group are:

1. Facebook – now called Meta, has two of the most engaging and prominent social media apps in the world – Facebook and Instagram. It also has two of the biggest messaging apps called Messenger and WhatsApp. However, Facebook makes most of its money from display ads.

2. Amazon — is one of the largest business-to-consumer e-commerce platforms in the world. It has a preferred membership program of over 200 million loyal market global subscribers. Apart from its online marketplace, Amazon also benefits from cloud computing services and advertising.

3. Apple — has the largest number of smartphone users. They derive their sales primarily from device sales, but recently they have also focused on high subscription services like cloud storage, streaming music, video, and games.

4. netflix – it is the first Internet media company to create an innovative DVD substitute for on-demand streaming services. Today, it serves over 200 million subscribers.

5. Google – now identified as Alphabet, is a technology conglomerate with Google and other segments. It started as an internet research company and now acquires and develops consumer-facing products. Google is also a growing cloud computing company and small hardware company.

The state of FAANG shares in 2022

Since the start of the year, FAANG has surged in, making many investors doubt its potential. The market is suffering 16% worse than it was in 1939. Additionally, Netflix tops the list of wealth destroyers as it continues to hemorrhage profits and has fallen around 68% since January.

Facebook, aka Meta, has also suffered a drop of more than 40% since the start of the year. Interestingly, shares of promising tech startups like Robinhood and electric vehicle maker Rivian also bottomed. Work from home tech tools like Zoom, which had exciting investors during the pandemic, have racked up numerous losses since the start of the year.

This sudden drop leaves many market watchers stunned as the market continues to grapple with recession fears and rising interest rates, among other things. Additionally, tech companies, including FAANG, are experiencing several headwinds.

What does all this mean? Does that mean tech companies have the odds on their side?

The year started with some interesting macro headwinds that helped hammer tech stocks. Some of these macroeconomic headwinds are war in Ukraine, slow economic growth, tangled supply chains, skyrocketing inflation, COVID-19 lockdowns in China, are just some of the headwinds.

These events have contributed to a complex macroeconomic environment over the past 100 years. On top of all these headwinds are the social media markets, which can sway millions of people in a second to take a particular side.

Market statistics 2022

Due to these uncertainties in the stock market, many investors are taking a smart move by investing in “safe haven assets” to protect themselves. We see this effect in the surge in demand for gold and the outperformance of value stocks. Unfortunately, this demand and performance is dealing a heavy blow to the technology sector. As a result, investors are pulling millions from their investments in tech stocks, which is a sign of true capitulation.

FAANG Shares

Following several situations and the impact of the movement of prices of technology stocks on the market, investors anticipate that the Federal Reserve could resort to an increase in interest rates to fight against inflation.

The bank will attempt to create a “soft landing” for the US economy by fighting inflation as gross domestic product (GDP) growth continues. However, this strategy is difficult, so tech investors are considering exiting.

Another strategy to consider is quantitative easing (QE), which involves buying billions of dollars in mortgage-backed securities and government bonds to increase the money supply and boost consumer and business lending. . This strategy has delivered an impressive economic recovery, boosting risky assets like tech stocks even during the recent pandemic downturn.

Despite the recessionary buzz, the net buying volume remains constant, so since April, the buying power of many investors has increased week after week. The average purchase volume per user increased by up to 85% compared to the first two weeks of April.

Market experts predict that headwinds in the stock market could take some time to set in. Still, Vinay Bharathwaj, co-founder of Stock, noted that FAAG shares may only have a short-term impact in today’s market. However, they will bounce back with reasonable cash reserves and excellent market leadership positions. Moreover, the whole wave of recession makes many investors secure good calls to trade. As a result, they start picking good stocks that are trading at a discount.

Other actions with promising futures

With FAANG stocks declining, many are quick to respond that the stock market is not a market to dabble in now, but that’s not necessarily true. Instead, if you want to find the best stocks to invest in, you can consider the CAN SLIM system to guide your choice.

I like to invest in stocks whose annual and quarterly earnings have recently increased by at least 25%. I make sure that the company also has a new and innovative product or service. You can also consider businesses that are not yet profitable and generating considerable revenue growth.

Personally, I find it beneficial to keep an eye on the demand and supply of the stock while focusing on leading leading industry stocks and targeting options with strong institutional backing. But to each his own. I suggest you find what works for you and follow the path accordingly.

If you want to continue to mint money and retire as a millionaire or even billionaire with stocks, you should consider other products with a brighter future than FAANG stocks. Some of these stocks are Pfizer (PFE 3.59%).

picture by the explosion on Unsplash

Pfitzer is a well-known corporate name in America. However, it has become a global name after producing millions of doses of its COVID 19 vaccine. In 2021, Pfizer’s bottom line doubled. As a result, experts predict it will see at least a 105% to 156% increase in revenue and profit in the fourth quarter. Pfizer’s activities can make those predictions come true.

CNBC in trouble with Fang stocks

There is a massive demand for COVID-19 vaccines as the pandemic does not appear to be ending soon. Its antiviral drug, Paxloid, treats people diagnosed with COVID-19. According to industry forecasts, this drug will generate at least $22 billion in sales, with a possible acquisition of smaller companies like Arena Pharmaceuticals, which has a promising anti-inflammatory drug, Etrasimod.

While it’s impossible to say if Pfizer stock will do well, we can predict that it will soon become a trillion-dollar company within 18 years.

picture by Piggy bank on Unsplash

If you want to participate in the cryptocurrency craze but are struggling to decide how to invest in it without buying the actual crypto, you can start with Coinbase Global. Coinbase is a colossal crypto trading platform that allows users to buy and sell cryptocurrencies.

The platform has 89 million verified users and 185,000 ecosystem partners in over 100 countries. Additionally, the company’s 2021 tax revenue has seen a massive 766% increase, skyrocketing its revenue from $1.3 billion to $7.8 billion in 2021. Indeed, the future of the company is very promising.

Nvidia (NVDA-2.59%)

Although Nvidia had a tough time at the start of the year, you should bet some money on it if you’re a long-term investor. Now is the best time to buy as the stock is down but holds a future that will surely strengthen.

Conclusion

As the market evolves, it is no longer as simple as “buying FAANG”. Even though the current fear-driven environment is keeping many investors on their toes, there is still time to identify genuine, long-term oriented investors.

“I’m not looking to jump over seven-foot bars; I’m looking for one foot bars that I can step over. -Warren Buffet-