To get a gist of just how big their stock prices are, we can look at data from the past few years. The S&P 500 index represents the U.S. market based on the market capitalization of the 500 largest stocks on NYSE and NASDAQ, both stock exchanges (New York Stock Exchange and National Association for Securities Dealers Automated Quotations respectively). Stock exchanges are marketplaces in which securities, stocks, commodities, and other financial products are sold. Stock exchanges allow buyers and sellers to trade efficiently.
Based on the NASDAQ, a couple years ago in 2017, Facebook was up 47%, Amazon 27%, Netflix 36%, and Google 16%. Their rankings in the S&P 500 index were 5th, 3rd, 31st, and 8th respectively. These high rankings tell us that the FANG stocks have a greater impact on the value of the index than any other company, which also means that these four companies have control over the overall market.
Many economists view this control negatively and express multiple concerns. One concern involves investors. Because so many of them are all investing in these four companies alone, the outcome is scary for them if FANG experiences a crash. In fact, crashing is one of the biggest things that economists worry about for FANG. This is because when you compare the situation of FANG to the dotcom stocks in the late 1990s, they appear similar with similar predicted progress and dotcom ended up crashing lasting from 2000 to 2004. Many also simply state that it is just not healthy to be having this much control over the market.
But the FANGS also have their own benefits and are all subtly different. They are enormously profitable and the products they sell are captivating and efficient for consumers and users. Furthermore, they can sell their products whenever they have internet access, and they don't have to worry about supply chain issues.
It is interesting to predict what the outcome will be for these four big companies. They're great now, but will they still be this great in the future?
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Sometimes FANG is rewritten as FAANG to include Apple. Apple is unique from the other 4 companies in that its main product is hardware. This gives it its own set of strengths and weaknesses. For example, it may have an easier time transitioning to a subscription service but have less padding through non-central businesses. Recently, it has seemed like Apple has been outpacing FANG. It is interesting to see how these companies interact with each other.
ReplyDeleteSource: https://www.marketwatch.com/story/this-chart-shows-how-apple-has-left-the-fang-stocks-in-its-wake-as-analysts-predict-more-gains-2019-10-25