What is FAANG?

There is a valid reason you may have recently heard this phrase used frequently. FAANG stocks have a history of producing dividends and making news. Find out how by reading on.

When Jim Cramer of CNBC first used the term FAANG stocks in 2013, which stands for Facebook\Meta, Amazon, Apple, Netflix, and Google, he may have unintentionally started an investment trend. The huge technology companies require no introduction, but investor interest in their equities has nearly doubled in the post-COVID era.

The following are the reasons why there has been a growing interest in knowing how to invest in FAANG stocks from India: 

During the global lockdown, content consumption and the services these companies provided were at an all-time high. For knowledge, exchange, communication, purchases, grocery shopping, and entertainment, among other things, people relied on these businesses and their products. These five names kept growing steadily during the lockdowns while numerous other multinational corporations battled to survive.

Before you do further reading on how to invest in FAANG stocks from India, note that according to a Forbes analysis, despite difficulties with antitrust legislation, “they (FAANG companies) provide at least +50% potential for traders during the next five years.” Let’s look at certain statistics in this case:

• Amazon (AMZN) enjoyed a massive 50% share of US retail e-Gross commerce’s Merchandise Volume (GMV) for 2021, up from 37% in 2017
• Apple (AAPL) maintains a dominance in the iOS app store, limiting access for developers to more over 100 million iPads and iPhones in the US.
• Facebook\Meta (FB) seized a sizable portion of $84.2 billion
• Google (GOOGL) had $146.9 billion in advertising revenue in 2020, with a $647 billion market share. This represents a 35.7% share of the market for social media advertising. [Source: Forbes]

Lets look at FAANG returns for the past years. As on 26 th Aug 2022

Source: medium.datadriveninvestor.com

Due to FAANG’s dominant market position, adjustments in its prices have a significant effect on the broader market. And despite the fact that the FAANG stocks were frequently examined for monopolies or duopolies by antitrust bodies in different nations, their expansion is unavoidable owing to the expanding demand for their products or services and the strategy of introducing spinoffs. The US accounts for 59% of the total market capitalization. It currently has a market capitalization of more than $5 trillion and makes up more than 33% of the NASDAQ.

Why Should You Invest In FAANG Stocks? 

Since the goods and services they provide are used all over the world and have become an essential part of our daily lives, FAANG shares are the most prominent stocks not just on the US markets but also globally. Their combined market value exceeds $4 trillion, which would be greater than the GDP of the majority of nations. The following are the reasons why you should buy FAANG stocks from India:

• Strong growth in the past: Any company in this group will probably impress you if you study its past performance. These businesses have not only seen steady development in their sales and profits but also phenomenal stock price increases.
• The top enterprises and brand recognition are stapled names: Each name in this stock category refers to a well-known American institution. Consider this: Is there any single name on the previous list that you haven’t heard of? Investors prefer to invest in things they are familiar with in the end. Demand for stocks of well-known companies will always exist on Wall Street.

• Popularity among institutions and substantial holdings of renowned investing companies: For good reason, retail investors frequently mimic the moves taken by professional investors. Big money is aware of where the deals are. The fact that each of these companies is a common component of numerous mutual funds, index funds, and exchange-traded funds (ETFs) makes them popular choices among institutional investors.

• Investments in potentially innovative new technologies: Most people find that new technology has an allure that can’t be found anywhere else. Potentially game-changing new goods and services make for exciting conversation subjects. This encourages investors to undertake more study than they may have otherwise done on, for example, a standard energy firm or consumer goods stock. 

• Stability due to lower variation: Although FAANG stocks exhibit growth stock behaviour, they are not very volatile. Investors find these to be highly alluring because of their consistency and propensity to generate higher rates of return.

After all, the best stock market judgments are typically the ones that have been thoroughly researched. Investors looking at how to invest in FAANG stocks from India typically do better when investigating the kinds of businesses and goods they are personally interested in.

For the majority of investors, adding FAANG stocks to a well-diversified investment portfolio is a welcome addition. These stocks are more reliable than those of smaller tech companies because they represent some of the biggest companies in the world. Additionally, there is a great likelihood that a venture will produce a strong return given its track record of success.

FAANG companies continue to expand in India 

The five tech behemoths continued to be interested in growing their businesses and networks in India in 2020. In the same year that Netflix (NFLX) announced its low-cost mobile-only subscription, Facebook\Meta (FB) as well as Google (GOOGL) both made investments in Reliance Jio, hoping to further leverage the influence of the Reliance-FB-Google cooperation on the use of OTT services.

While Amazon (AMZN) unveiled a $250 million venturing fund for Indian companies in April 2021, Apple (AAPL) inaugurated its first online shop in India amidst lockdowns in 2020. The Amazon Samabhav Venture Fund unveiled couldn’t have come at a more intriguing time. The Indian government and the small and medium-sized businesses that use its platform for trade were criticising the e-commerce giant at this time. The oddest detail, which highlights Amazon’s ambitious expansion strategy, is that the fund will assist small firms in switching to online transactions in addition to automating and digitising their company processes. Nobody will be surprised if they sell online. 

Going into the details of Facebook\Meta and Google’s investment, Facebook\Meta (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\Meta’s biggest market, while its deal with Jio has gathered 400 million users within a short period. Through selling on WhatsApp, this alliance is well positioned to assist small retailers in becoming digital, a goal shared with Amazon. Google, too launched a new fund of $10 billion back in July 2020 for investments in India. 

But most importantly, and probably the most underrated fact that is going to help not only Facebook\Meta(FB) but also Google (GOOGL) is their collection of valuable user data. This repository is the main source of their long-term revenues through targeted ads. While India remains a major buyer of 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 witnessed a spike in demand for iPhone 11, 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 

Why makes FAANG stocks so popular in India?

Apart from the reasons above why FAANG view India as a viable consumer market, there are various reasons why investing in these businesses may be wise. Their aggressive pursuit of the market for digital payments is one such factor. Spinoffs were previously mentioned as a key growth strategy for them. Each of these companies is eyeing digital payment wallets – their spinoff products – to rule sections of this market.

Since the pandemic hit, individuals have chosen for contactless payments, which has resulted in growth for Apple Pay, Google Pay, and Amazon Pay. On the other hand, Facebook\Meta’s WhatsApp Pay now has partnerships with the State Bank of India, ICICI Bank, Axis Bank and HDFC Bank. 

Globally, investors want to keep their FAANG stocks for a long time. According to a Financial Express article, during the past ten years, these stocks have given investors returns of over 500%. Additionally, these stocks have made a major contribution to the gains made by the Nasdaq and the S&P 500 indices. The fact that many early investors, part of the millennial and young sections, entered the markets last year helped enhance demand. This group of new investors had experience with these businesses and their goods, so they were aware of the possibilities. As a result, interest in and demand for the FAANG group of shares rose.

How to invest in FAANG companies from India?

Along with the elements above and FAANG’s performance, it’s critical that you take into account analyst recommendations that could imply a strong buy, strong sell, or moderate buy signal. The majority of analysts provide guidance on these stocks’ typical 12-month price targets. 

Here are how you can buy FAANG stocks from India: 

• Direct Investment: There are partnerships between some domestic Indian stockbrokers and US stockbrokers. While carrying out your trades, these brokers would serve as mediators. 

Stockal has a simple user interface and makes money transfers simple. Additionally, they provide fractional investing.

• Determine your level of risk tolerance because FAANG stocks are growth stocks with increased risk.
• Open an account and choose an investment channel (brokers, investment applications like Stockal, or the NSE IFSC).
• Determine the amount based on your investment objectives and risk tolerance.
• Place your order. 
• Stock Baskets: The benefit of using stock baskets to invest in foreign stocks is that it gives you access to distinctive stocks based on diverse industries. For instance, the Stockal Blue Chip Tech Stack invests in exclusively technological online businesses that are essential to the sector and have MOATs or other competitive advantages.
• ETF: You can access ETFs through both direct and indirect means. Either directly via a domestic broker or through a foreign broker, you might purchase US ETFs. Additionally, you can purchase Indian ETFs that track global indices. For instance, the Stockal NASDAQ ETF offers simple onboarding, reliable security, and prompt notifications of investing opportunities.
• Mutual Funds: You can take part by selecting international mutual funds with a US emphasis. These funds own a variety of assets, most of which will have relatively little exposure to foreign companies. As is frequently the case with direct investment choices involving brokers, you are not obliged to open an international trade account or ensure you keep a minimum deposit. Using a global mutual fund, you might invest primarily in equity-related or market products. These financial instruments would come from overseas market-listed companies.

Here are some other factors to consider –

# FAANG’s performance 

Over the past ten years, the FAANG stocks have significantly outperformed the market. With a return of 1,750%, Netflix took the top spot, followed by Alphabet with returns of 651%, and Apple with 847%. Finally, Apple and Meta Platforms produced advances of 535% and 438%. These businesses all profited from leadership in the field, rapid revenue growth, as well as a significant market opportunity.

[Comparison chart of FAANG stock prices]

Margin Forecasts and Compare Price for FAANG and FAANG 2.0 Indexes

Source: Fortune.com

#FAANG portfolio price 

Following tech sector sell-offs in response to inflation plus supply chain fears brought on by the Covid-19 epidemic, leading growth companies have failed to recapture the form that propelled entrepreneurial ventures to record all-time high costs last year. As seen by firms like Netflix, which had a major presence in Russia until ceasing operations in the wake of the Russian invasion of Ukraine, geopolitical tensions have also had a significant negative effect on typically steady stocks. Here are the current earnings of the FAANG stocks:

• Facebook (Meta): $2.46 per share
• Apple: $1.20 per share
• Amazon: A 20-cent loss
• Netflix: $3.20 per share
• Google: $1.21 per share

Another option of fractional investing 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 

In the last decade, almost all the five technology giants have faced heat from government bodies and regulatory bodies over content filters and unique situations. The latest example is the Korean TV series Squid Game which 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\Meta’s (FB) constantly faces allegations of data theft and breach of user privacy, and 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 stocks 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.      

FAQs

• How can I invest in FAANG stocks?

The best way to buy FAANG stocks from India is through the US stock market via the Stockal app. 

• Are FAANG stocks a part of S&P 500?

Yes, FAANG stocks are a part of S&P 500. 

• Who coined the term FAANG?

The term FAANG was coined by Jim Cramer. 

• Why should I buy FAANG stocks from India?

You should buy FAANG stocks from India because over the past ten years, the FAANG stocks have significantly outperformed the market.

To Conclude

To answer the question as to which would be the best way to buy FAANG stocks from India, as direct investing has the lowest cost but risk as well, the ideal strategy depends on your willingness to take more risks. 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. To learn more on how to buy FAANG stocks from India, visit Stockal.