What it means
The acronym FANG takes its letters from Facebook, Amazon, Netflix and Google. It was popularised in the early 2010s by a television market commentator who used it to point to the strongest internet growth stocks.
Apple was not in the original group, but was added later to form FAANG. Stock tickers are short codes used to identify shares on an exchange.
Facebook traded under the ticker FB and Amazon under AMZN, which is why those two appear in the label of this term. Facebook's ticker later changed when the company renamed itself Meta, so older articles use a code that no longer applies.
The four companies were grouped because they shared features. They grew revenue quickly, reinvested heavily and traded at high valuations compared with their profits.
Investors saw them as a way to gain exposure to online advertising, e-commerce, streaming and search, all of which were growing faster than the wider economy at the time. The group is a good example of how market labels simplify and sometimes mislead.
The businesses were different in their economics, with advertising, retail, subscriptions and cloud services all driving results. Owning all four gave exposure to the technology sector, but not diversification across industries.
Valuation is the key topic for a finance reader. High-growth stocks are priced on expectations of future earnings, so they can fall sharply if growth slows or interest rates rise.
A group that rises together often also falls together, which magnifies risk for anyone holding all of them. Today the term is mostly of historical and educational interest.
It helps you read older market commentary and understand how investors thought about growth stocks. For decisions, look at each company's own results and the price you are paying for them.
In practice
Real-world examples.
Example
An investor reads an article from the mid-2010s that praises FANG stocks. She notices that it uses FB as a ticker, and finds that the code now belongs to a different company name. She looks up the current ticker before searching for prices, because using the old code would have returned no result or the wrong company.
Example
A student is asked to explain why a four-stock group is not a diversified portfolio. He shows that all four depend on consumer internet spending and respond to the same interest rate changes. The group is exposed to the same sources of risk, so a fall in consumer spending or a rise in interest rates would hit all four at once.
Example
A portfolio manager compares his fund with an index that includes the FANG companies. He explains to clients that the fund performed worse because it held less of those stocks. The explanation helps clients to see the source of the difference, and it shows that the gap came from a deliberate choice about concentration and not from poor stock selection.
Formula
Calculation
Average return of the group = sum of the four stock returns / 4
These figures are hypothetical. Suppose over a year Facebook returns 20%, Amazon returns 30%, Netflix returns 10% and Google returns 40%. Sum of returns = 20 + 30 + 10 + 40 = 100%. Average return = 100 / 4 = 25%. If an investor put $20,000 in equal parts, so $5,000 in each, the portfolio would grow to 20,000 x 1.25 = $25,000, a gain of $5,000.Case study
Seen in the real world.
Pinecrest Investments is an illustrative, fictional fund manager that launched a thematic fund tracking four large internet growth companies, similar in concept to the FANG group. In its first year the fund returned 28%, against 12% for the broad market.
Marketing leaned on the result, but the risk team pointed out that the fund had fallen 22% in a single quarter during the year. For clients near retirement, a loss of that size could be hard to recover from.
In this fictional story the firm added a risk warning to its brochure and recommended the fund as no more than 10% of a client's portfolio. The lesson is that strong returns from a narrow group must always be read alongside the volatility needed to earn them. The compliance team also insisted that the fund show its worst quarterly fall next to its best annual return in all marketing material. Investors who read both figures were better prepared when the next market decline arrived, and fewer sold in a panic.
Watch out
Common mistakes.
- Treating FANG as a diversified portfolio when all four companies are in the same sector.
- Using an outdated ticker such as FB when searching for current prices.
- Assuming that past returns of the group predict future results.
Questions
People also ask.
What does FANG stand for?
It stands for Facebook, Amazon, Netflix and Google.
Why do the letters FB and AMZN appear in the name of this term?
They are the stock ticker symbols that identified Facebook and Amazon on the exchange when the label was popular.
How is FANG different from FAANG?
FAANG adds Apple as a fifth company to the original four.
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