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What is FANG Stocks?

2021 reads · Last updated: December 5, 2024

FANG Stocks refer to four highly influential technology companies in the U.S. stock market: Facebook (now Meta Platforms), Amazon, Netflix, and Google (now Alphabet). The term FANG was first coined by CNBC television host Jim Cramer in 2013 to describe these tech giants' outstanding performance and strong growth potential in the market. FANG stocks are known for their high growth, high returns, and market leadership, attracting significant attention from investors. In recent years, the concept of FANG stocks has expanded to include other tech giants like Apple and Microsoft, forming variations such as FAANG or FAAMG.

Definition

FANG stocks refer to four highly influential technology companies in the U.S. stock market: Facebook (now Meta Platforms), Amazon, Netflix, and Google (now Alphabet). These companies are known for their high growth, high returns, and market leadership, attracting significant investor attention.

Origin

The term FANG was first coined by CNBC television host Jim Cramer in 2013 to describe these tech giants' outstanding performance and strong growth potential in the market.

Categories and Features

FANG stocks are characterized by high growth potential, strong market influence, and innovation capabilities. In recent years, the concept of FANG stocks has expanded to include other tech giants like Apple and Microsoft, forming variants such as FAANG or FAAMG. These stocks are typically seen as leaders in the tech industry, with high market volatility and investment returns.

Case Studies

A typical case is Netflix, which revolutionized the entertainment industry through its streaming services, leading to a significant increase in its stock value over a short period. Another example is Amazon, which, through its expansion in e-commerce and cloud computing services, has become one of the highest market cap companies globally.

Common Issues

Investors may encounter issues such as high market volatility, the risk of overvaluation, and rapid changes in the tech industry when investing in FANG stocks. Investors should carefully assess these risks and make investment decisions based on their risk tolerance.

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Trailing 12 Months

Trailing 12 Months (TTM) is a financial term that measures a company's performance over the past 12 consecutive months. This calculation is not limited to the company's fiscal year and can provide more timely performance data, applicable for calculating various financial metrics such as earnings, Earnings Per Share (EPS), Price-to-Earnings Ratio (P/E), and yield.

Dividend Discount Model

The dividend discount model (DDM) is a quantitative method used for predicting the price of a company's stock based on the theory that its present-day price is worth the sum of all of its future dividend payments when discounted back to their present value.It attempts to calculate the fair value of a stock irrespective of the prevailing market conditions and takes into consideration the dividend payout factors and the market expected returns. If the value obtained from the DDM is higher than the current trading price of shares, then the stock is undervalued and qualifies for a buy, and vice versa.

Dividend Discount Model

The dividend discount model (DDM) is a quantitative method used for predicting the price of a company's stock based on the theory that its present-day price is worth the sum of all of its future dividend payments when discounted back to their present value.It attempts to calculate the fair value of a stock irrespective of the prevailing market conditions and takes into consideration the dividend payout factors and the market expected returns. If the value obtained from the DDM is higher than the current trading price of shares, then the stock is undervalued and qualifies for a buy, and vice versa.

Compound Annual Growth Rate

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Compound Annual Growth Rate

The compound annual growth rate (CAGR) is the rate of return (RoR) that would be required for an investment to grow from its beginning balance to its ending balance, assuming the profits were reinvested at the end of each period of the investment’s life span.CAGR provides a concise way to assess the overall performance of an investment over a period of time, regardless of fluctuations over time. Although CAGR is a useful metric, it may not fully reflect the actual compounding effect over the period, especially when the ROI fluctuates greatly.

Fibonacci Retracement

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Fibonacci Retracement

Fibonacci retracement levels, stemming from the Fibonacci sequence, are horizontal lines that indicate where support and resistance are likely to occur. Each level is associated with a specific percentage, representing the degree to which the price has retraced from a previous move. Common Fibonacci retracement levels include 23.6%, 38.2%, 50%, 61.8%, and 78.6%. These levels can be drawn between any two significant price points, such as a high and a low, to predict potential reversal areas. Fibonacci numbers are prevalent in nature, and many traders believe they hold significance in financial markets as well. Fibonacci retracement levels were named after the Italian mathematician Leonardo Pisano Bigollo, better known as Leonardo Fibonacci, who introduced these concepts to Western Europe but did not create the sequence himself.

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Log-Normal Distribution

The Log-Normal Distribution is a statistical distribution where a random variable is said to follow a log-normal distribution if the logarithm of the variable is normally distributed. This type of distribution is often used to model positively skewed data occurring in various natural and social phenomena, such as income, city populations, stock prices, etc.

Order Driven Market

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Order Driven Market

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