FAANG is an acronym that refers to the stocks of five prominent American technology companies: Meta (META) (formerly known as Facebook), Amazon (AMZN), Apple (AAPL), Netflix (NFLX); and Alphabet Inc.’s Google holding company, now called Alphabet (GOOGL). The term was coined by Jim Cramer, host of CNBC's Mad Money show.The FAANG stocks have been some of the best performers on the stock market in recent years. Between 2012 and 2017, their share prices increased by an average of 173%. In comparison, the S&P 500 Index returned only 97% over that period.Many investors are attracted to FAANG stocks because they offer high growth potential. All five companies are leaders in their respective industries and continue to expand rapidly into new markets. They also have strong brands which help them attract customers and generate profits even during downturns in the economy.However, as with any investment, there is always risk associated with owning FAANG stocks. All five companies are highly dependent on consumer spending trends which can be volatile from one year to the next. Additionally, they all trade at high valuations relative to earnings so a sharp decline in their share prices could occur if investor sentiment changes suddenly.
