FAANG Stocks? Buy/Invest FAANG Stocks from India
November 24 2021 - Team Stockal
What are FAANG stocks?
What is FAANG? In case you have heard this term a lot lately, there’s a good reason. FAANG are known to make news and make dividends. Read on to find out how.
Back in 2013, when CNBC’s Jim Cramer coined the term FAANG stocks – the famous acronym for – Facebook, Amazon, Apple, Netflix and Google – he may have set off an investment trend without intending. The big technology giants need no introduction but in the post-covid world, interest in their stocks has almost doubled among investors.
There are two reasons for this. The consumption of content and the utility these companies offered during the global lockdown reached an indispensable level. People relied on these companies and their products for information, exchange, communication, shopping, grocery, entertainment among other things. Two, while many other multinational companies struggled to survive the lockdowns, these five names maintained a steady growth.
A Forbes report states, “they (FAANG stocks) have at least +50% upside for investors over the next five years” despite Antitrust regulations challenges. Let us take a look at some statistics here –
- Amazon (AMZN) enjoyed a whopping 50% share in the US retail e-commerce Gross Merchandise Volume (GMV) in 2021, up from 37% in 2017
- Apple (AAPL)has a monopoly in the iOS mobile application store, controlling developers’ access to more than 100m iPhones and iPads in the US
- Facebook’s (FB) took away a giant share of $84.2bn and Google (GOOGL) had advertising revenue of $146.9bn in the global advertising market share of $647bn in 2020. This is 35.7% stake in the social media advertising market. [Source: Forbes]
Source: Yahoo Finance
And even though the FAANG are constantly being scrutinized by Antitrust committees in various countries for monopolies and duopolies, their growth is inevitable due to the rising consumption of their content or products and their strategy of launching spinoffs.
FAANG companies continue to expand in India
In 2020, the five tech giants showed continued interest in expanding operations and extending their networks in India. Both Facebook (FB) and Google (GOOGL) invested in Reliance Jio the same year while Netflix (NFLX) launched its low-cost-mobile-only subscription with the intention of doubling down on the impact of Reliance-FB-Google partnership on the consumption of internet and OTT platforms.
Apple (AAPL) launched its first online store in India amid lockdowns in 2020 while Amazon (AMZN) announced a $250 million venture fund for Indian startups in April 2021. The timing of the Amazon Samabhav Venture Fund announcement couldn’t have been more interesting. This was the time when the e-commerce giant was facing heat from the Indian government as well as the small and medium businesses that trade on its platform. However, the most peculiar fact that showcases Amazon’s aggressive strategy of expansion, is that the fund will help small businesses switch to online transactions apart from automating and digitizing their operations. No prizes for guessing where they will sell online.
Going into the details of Facebook and Google’s investment, Facebook (FB) has poured in $5.7 billion in Jio for a 9.99% stake while Google (GOOGL) invested $4.5 million for a 7.73% stake. It is now common knowledge that India is Facebook’s biggest market while its deal with Jio has gathered 400 million user count within a short period. This partnership is also poised to help small retailers go digital through selling on WhatsApp – a similar expectation that Amazon (AMZN) has raised too. Google too launched a new fund of $10 billion back in July 2020 for investments in India.
But most importantly, and probably the most under-rated fact that is actually going to help not only Facebook(FB) but also Google (GOOGL) is their collection of valuable user data – a repository that is the main source of their long-term revenues through targeted ads.
While India remains a major buyer for Android-based phones, Apple (AAPL) has geared up more aggressively in the past few years. Adapting to the Indian demands, it has expanded its domestic production and has witnessed a spike in the demand for iPhone 11 and, particularly the new SE models – many of which are priced at the same amount as several other Android phones. According to a report in Business Insider, Apple doubled its India smartphone share to 4% in the last quarter of 2020. In July 2020, Apple’s contract manufacturing company Foxconn started assembling iPhone 11 in India.
Why are FAANG stocks so popular in India?
Apart from the above reasons where FAANG are seeing India as a potential consumer market, investment in these stocks may be considered smart for several other factors. One such factor is their aggression towards capturing the digital payments market. We mentioned spinoffs earlier as their vital growth strategy. Each of these companies are eyeing digital payment wallets – their spinoff products – to rule sections of this market.
Apple Pay, Google Pay and Amazon Pay already have shown growth due to the pandemic where people opted for contactless payments since the pandemic hit. On the other hand, Facebook’s WhatsApp Pay now has partnerships with the State Bank of India, ICICI Bank, Axis Bank and HDFC Bank.
Investors globally wish to hold FAANG stocks for the long term. As per a report by the Financial Express, these stocks have yielded returns of over 500% to the investors over the last 10 years. These stocks have also contributed significantly to the returns generated by the S&P 500 and Nasdaq indices.
How to invest in FAANG stocks?
Apart from considering the above factors and the performance of FAANG, it is also imperative that you consider analyst ratings that may indicate a strong buy or strong sell or a moderate buy signal. Most analysts advise on the average 12-month price target for these stocks.
Here are some other factors to consider –
# FAANG’s performance
Let us take a look at the 12-months and year-to-date (YTD) return comparisons of the FAANG companies. We studied reports of their performances in the last three months, and here’s what we learnt.
The price of Facebook (FB) stock is around $305 and it has given an ROI of about 34% over the last 12 months (as of July 2021) while its YTD return has been around 13.47%. Apple (AAPL) stock, on the other hand, is around $123 with a return of 56% in the last 12 months (as of July 2021) while the YTD has been a negative of 6% .
Amazon (AMZN) stock price currently stands at around $3196 with a 29% return in the last 12 months (as of July 2021) and a nearly negative YTD return of 0.76%. Netflix (NFLX) stock is around $483 with a return of 8% in the last 12 months and the YTD return has been nearly negative 10%. Google’s (GOOGL) stock price stands at around $2277 with an ROI of about 63% over the last 12 months while the YTD return has been nearly 31%.
[Comparison chart of FAANG stock prices]
Source: Tipranks.com. Between May 2018 to May 2021
#FAANG portfolio price
Another factor is to know the portofolio price of each of these stocks in INR as an exchange rate of about Rs 74. One share of each of the FAANG company stocks stands at –
Netflix (NFLX): Rs 35,742
Google (GOOGL): Rs 1,68,498
Facebook (FB): Rs 22,570
Apple (AAPL): Rs 9,102
Amazon (AMZN): Rs 2,36,504
That means holding one share of each of these stocks will cost a person around Rs 4.73 lakh. There’s another option of fractional investing that allows you to hold a portion of all the FAANG stocks if you do not wish to go all out. Imagine with as little as just Rs 5,000/- you may start accumulating FAANG stocks to meet your long-term investment goals. How cool is that?
What are the major challenges in investing in FAANG?
# Unique regulation and legal challenges
Almost all the five technology giants have faced heat in the last decade by government bodies and regulatory bodies over content filters and unique situations. The latest example is Korean TV series Squid Game that is currently trending at #1 in 90 countries on Netflix (NFLX). A Korean company SK Broadband, based out of Seoul, South Korea, has sued Netflix asking the OTT giant to pay for a surge in network traffic and maintenance work caused by fans watching the series. Similarly, Facebook (FB) constantly faces allegations of data theft and breach of user privacy, so do Google (GOOGL) and Amazon (AMZN). Such news often affects the stock market performances and hence may be considered before investing.
# Monopoly and duopoly discomforts
Due to the various product spin offs such as payment wallets launched by these companies, the FAANG are often accused of monopolizing a varied market. That means if you invest in FAANG shares, and one of their products is banned or lifted out of the market, it may affect their overall performance.
One of the smarter ways to invest in FAANG stocks is through an advisory platform that constantly informs and updates you about their volatile nature or their quarterly performances
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