Updated: Jan 23, 2020
FAANG is the popular acronym for Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL). Along with Microsoft (MSFT) they are now the technology titans of our era. In fact, four of these companies are now the largest companies in the world each with $1 Trillion market-cap value including AAPL, MSFT, AMZN, and GOOGL.
Each in their own rights are major players in their respective industries. FB and GOOGL dominate the global online advertising and mobile business. AMZN captures the lion’s share of e-commerce and cloud services. Although NFLX is facing greater competition it remains an influential player along with GOOGL in the area of streaming. Even MSFT and AAPL, once slow-growing software/hardware Technology names have transformed themselves into high-end growth giants involved in cloud computing, AI, and consumer products.
Although most retail and institutional investors have FAANG stocks in their portfolios we thought that if you want to introduce these stocks to new accounts or to add to current positions the following ETFs may still offer you exposures to FAANG stocks but in a more diversified and less volatile way. There are currently over 37 FAANG related ETFs available for investing. The following is a list of the four (4) FAANG ETFs which may replicate the performances of the above five important technology stocks:
Invesco NASDAQ 100 (QQQ) – 104 stocks
This is one of the largest Technology related ETF available for trading. It includes a broad list of the largest 100 domestic and international nonfinancial companies on the NASDAQ Stock Market based on market capitalization. The largest stock holdings are: AAPL (11.91%), MSFT (10.75%), AMZN (7.95%), FB (4.51%), GOOG (4.32%), and GOOGL (4.31%).
Invesco NASDAQ Internet (PNQI) – 83 stocks
This ETF is comprised of some of the largest and most liquid companies that are engaged in internet-related businesses. The largest stock holdings are: GOOG (8.29%), BABA (8.10%), FB (8.00%), NFLX (7.83%), AMZN (7.65%).
First Trust ISE Cloud Computing Index (SKYY) – (63 stocks)
It is one of the first ETF to offer exposure to the cloud computing industry. The top stock holdings are: GOOGL (4.58%), MSFT (4.43%), AMZN (4.21%), ORCL (3.97%), and VMW (3.85%).
First Trust Dow Jones Internet Index (FDN) – (42 stocks)
This unique ETF is comprised of companies that derive at least 50% of their sales from the internet and web-based businesses. The largest stock holdings are: AMZN (8.55%), FB (7.39%), CSCO (5.41%), CRM (5.15%), NFLX (4.80%), GOOGL (4.56%).
Enclosed below are charts showing their performances over the past year. In addition, are brief technical reviews of each of the above ETFs. It is interesting to note that except for QQQ the other three ETFs are not too extended, at least from an intermediate-term perspective.. They may soon catch up to the benchmark QQQ as growth investors that need to diversify their portfolios seek growth situations that offer favorable risk/reward credentials into 2020.