Investors are increasingly convinced about the future growth prospects of the dominant US technology giants – but research shows they are failing to make the most of the potential investment opportunities.
The so-called FAANG stocks – Facebook, Amazon, Apple, Netflix, and Google – account for around 20% of the S&P 500 and as much as a third of the Nasdaq 100 and have historically outperformed both indices. They generate money from a wide range of sectors which have benefited from the increasing acceleration of digitisation both before and during the COVID-19 pandemic.
Increasing use of computers, e-commerce, the Cloud, streaming and the switch of advertising online supports the growth of the sector. The combined market capitalisation of Google, Amazon, Facebook, Apple, and Microsoft at around $7.5 trillion means that if it were a country, it would be the third largest economy in the world just behind China.
Past performance is no guarantee of future performance but GraniteShares’ study among UK retail investors shows strong support for the growth prospects of the FAANGs which ought to translate into increased investment. GraniteShares launched the world’s first FAANG ETP earlier this year along with other products offering access to GAFAM – Google (technically Alphabet) Amazon, Facebook, Apple, and Microsoft – as well as FATANG – Facebook, Amazon, Tesla, Apple, Netflix, and Alphabet.
The FAANG ETP – ticker FANG – as well as GAFAM – ticker GFAM – and FATANG – ticker FTNG – have outperformed the US market since launch on March 8th2021.
Not all investors are convinced but more than half (51%) of regular share traders expect the share prices of the FAANGS to grow over the next three years with just 11% predicting they will fall and 26% believing they will trade sideways.
More than two out of five (43%) believe they will outperform the S&P 500 over five years while 20% believe they will not outperform the index and 37% do not know. They are less optimistic about outperforming the Nasdaq 100 over the same period but 36% still believe they will beat the index while 21% believe they will not and 43% do not know.
There is demand from investors to expand the FAANG acronym to include other major US technology stocks such as Microsoft and Tesla. Nearly half (47%) of UK retail investors would back an expanded FAANG sector while just 20% would oppose expanding the FAANG definition and a third (33%) do not have an opinion.
But investment in FAANGs by UK investors is low
Despite the optimism about the future prospects of the FAANGS, the study found that investment levels in the US tech giants are surprisingly relatively low among regular UK share traders and investors are unsure about how to access the US tech investment story.
Around 40% of regular share traders in the UK say they have no exposure to US technology companies in their current portfolios. On average investors have around 8% of their portfolio invested in US technology stocks and less than one in 10 (9%) have more than 15% of their portfolio allocated to the US tech sector.
A possible explanation thrown up the research is that investors are struggling to find ways to invest in US technology stocks which do not involve simply buying the shares direct
More than two-thirds (68%) are not aware they can invest in FAANGS through Exchange Traded Funds (ETFs) listed on the London Stock Exchange. ETPs offer a pure way to gain exposure to top tech companies in the U.S. market. Indices are equally weighted and rebalanced quarterly.
GraniteShares currently offers 54 exchange traded products (ETPs) listed on the London Stock Exchange. They consist of a suite of index ETPs tracking FAANG stocks and a suite of Short and Leveraged Single Stock Daily ETPs tracking some of the most popular companies in UK and U.S. markets.
The FAANG, GAFAM and FATANG product suite, offers long, short and 3X leveraged ETFs on FAANG, GAFAM and FATANG indices and can be traded in a single ticker symbol via ordinary brokerage accounts.
If investors are convinced about the US technology growth story over the next three to five years, they provide a simple way of increasing portfolio allocations.
FAANG consists of Facebook, Amazon, Apple, Netflix, and Google while GAFAM includes Google, Apple, Facebook Amazon, and Microsoft and FATANG covers Facebook, Amazon, Tesla, Apple, Netflix, and Google ETPs offer a pure way to gain exposure to top tech companies in the U.S. market. Indices are equally weighted and rebalanced quarterly.
GraniteShares suite of ETPs on FAANG stocks
Leveraged ETPs on FAANG indices
UK Leveraged Single Stock ETPs
|Underlying stock||+3x Long||-3x Short|
|Lloyds Banking Group||3LLL||3SLL|
|Royal Dutch Shell||3LRD||3SRD|
US Leveraged Single Stock ETPs
|Underlying stock||+3x Long||-3x Short|
Capital at risk