US Markets

Investors want to get their teeth into FAANGS

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.

By
Guest

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

Underlying Index+3x Long -3x Short -1x Short 
FAANG3FNG3SFGSFNG
GAFAM3GFM3SGFSGFM
FATANG3FTG3SFTSFTG

Leveraged ETPs on FAANG indices

Underlying Index+3x Long -3x Short -1x Short 
FAANG3FNG3SFGSFNG
GAFAM3GFM3SGFSGFM
FATANG3FTG3SFTSFTG

UK Leveraged Single Stock ETPs

Underlying stock+3x Long-3x Short
AstraZeneca3LAZ3SAZ
BAE Systems3LBA 3SBA 
Barclays 3LBC 3SBC 
BP 3LBP 3SBP 
Diageo 3LDO 3SDO 
Glencore 3LGL 3SGL 
Lloyds Banking Group 3LLL 3SLL 
Rio Tinto 3LRI 3SRI 
Royal Dutch Shell 3LRD 3SRD 
Rolls-Royce 3LRR 3SRR 
Vodafone 3LVO 3SVO 

US Leveraged Single Stock ETPs

Underlying stock +3x Long -3x Short 
Alphabet 3LAL  3SAL  
Amazon 3LZN  3SZN  
Apple 3LAP  3SAP  
Facebook 3LFB  3SFB  
Microsoft 3LMS  3SMS  
Netflix 3LNF  3SNF  
NIO 3LNI  3SNI  
NVIDIA 3LNV  3SNV  
Tesla 3LTS  3STS  
Uber 3LUB  3SUB  

Capital at risk


Not Investment Advice Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.