FAAMG Stocks

What is ‘FAAMG Stocks’

FAAMG is an abbreviation coined by Goldman Sachs for five top performing tech stocks in the market, namely Facebook, Amazon, Apple, Microsoft, and Alphabet’s Google.

Explaining ‘FAAMG Stocks’

Roughly 3,000 companies (mostly tech companies) trade on the NASDAQ and the Nasdaq Composite provides an indication of how the tech sector is faring in the economy. Facebook (FB), Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), and Alphabet (GOOG)  account for 55% of the NASDAQ’s year-to-date (YTD) gains, as of June 9, 2017. Also, FAAMG stocks account for 37% of the returns of the S&P 500 index, which tracks the market capitalization of 500 large companies across various industries trading on the NYSE and NASDAQ.

Is There a FAAMG Bubble?

FAAMG has been likened to the tech stocks that were prevalent in the market before they crashed in the 2000 tech burst. Historically, growth stocks have a higher volatility than the market due to their risky ventures. However, FAAMG stocks have a valuation with an unusual low volatility, which bears a semblance to pre-dotcom crash tech stocks. While analysts, notably from Goldman Sachs and UBS, have expressed doubt in the continued low volatility of the tech giants, they agree that these tech stocks in the digital era still have plenty room to grow as they delve into new technological ventures in machine learning, big data, cloud computing, social media, video streaming, Artificial Intelligence (AI), block chain, and e-commerce systems.

Further Reading

    • Spotify’s Direct Listing: Is It a Recipe for Gatekeeper Failure – heinonline.org [PDF]
    • Exploring industry-wide responses and perception of techfins entering the market – lutpub.lut.fi [PDF]

    Q&A About FAAMG Stocks

    How much of the S&P; 500 has been contributed to by these 5 stocks?

    37% of returns from this index over this time period.

    Who are FAAMG stocks?

    FAAMG stocks are Facebook, Amazon, Apple, Microsoft and Google.

    How many years has Facebook been one of the top five largest U.S.-listed public companies by market capitalization?

    Since 2012

    Why have these 5 stocks had such a large impact on their respective indices?

    They are called growth stocks because of their high volatility and hazardous activities, but they have a relatively low volatility when compared to other growth stocks, making them comparable to the tech stocks that were popular before to the dotcom bust.